Investor Relations

Leasing

BASIC GROWTH STRATEGY

Continuing new investment to build a platform for growth, by further increasing the portfolio´s portion of prime properties that are "close, new and large"

OVERVIEW OF THE FISCAL YEAR

The Tokyo office building market, where roughly 200 of the segment´s buildings, representing more than 90% of its portfolio, are concentrated, experienced solid tenant demand and a stable, low vacancy rate against a backdrop of improved economic sentiment and a recovery in corporate earnings. This favorable environment led to higher margins of rent increases for both new and renewed leases.
Reflecting such an environment, the segment recorded revenue and profit growth for the March 2016 fiscal year, with higher rents and improved vacancy rates at existing buildings and full-year contributions from Sumitomo Fudosan Onarimon Ekimae Building and Sumitomo Fudosan Hirakawacho Building, which were completed during the previous fiscal year. The segment´s revenue from operations and operating income both reached record levels for the first time in seven years, surpassing the previous records in the March 2009 fiscal year.
The vacancy rate for existing buildings showed a slight improvement, to 4.7% from 4.9% at the end of March 2015, and tenant acquisition for new buildings is on a good track, including for Tokyo Nihonbashi Tower and Sumitomo Fudosan Shinjuku Garden Tower (Takadanobaba), which were completed in the March 2016 fiscal year and are almost fully contracted.

OUTLOOK

We are aiming for record revenue from operations and operating income in the March 2017 fiscal year, based on an improved earnings structure from existing buildings and full-year contributions from the buildings completed during the year under review, such as Tokyo Nihonbashi Tower.
Specifically, we are projecting a 5.3% increase in revenue from operations, to ¥330.0 billion, with a 6.9% increase in operating income, to ¥119.0 billion.

OUR LEASING PORTFOLIO (As of March 31, 2016)

In the Tokyo CBD (Central Business District)*, where buildings that meet the three conditions for prime properties−close, new and large−are in strong demand, our competitive portfolio will provide a strong foundation for us to utilize our strengths−development of high-value-added office buildings, tenant leasing and property management. We will utilize that foundation to maximize the earnings potential of our office building operations and build a strong base for the achievement of sustainable growth in the years ahead.

* Tokyo CBD (Central Business District): 7 wards, comprising Chiyoda, Minato, Chuo, Shinjuku, Shibuya, Shinagawa and Bunkyo

Major Flagship Buildings

Name Location
(Tokyo CBD)
No. of floors
(above ground/
below ground)
Completion Gross floor
area (m2)
1. Izumi Garden Tower Minato Ward 43 / 4 Oct. ´02 204,456
2. Shinjuku Sumitomo Building Shinjuku Ward 52 / 4 Mar. ´74 177,467
3. Sumitomo Fudosan Shinjuku Grand Tower Shinjuku Ward 40 / 3 Dec. ´11 168,329
4. Sumitomo Fudosan Shinjuku Garden Tower Shinjuku Ward 37 / 2 Mar. ´16 143,372
5. Shinjuku Central Park City Shinjuku Ward 44 / 2 Feb. ´10 130,299
6. Shinjuku Oak City Shinjuku Ward 38 / 2 Jan. ´03 117,575
7. Tokyo Nihonbashi Tower Chuo Ward 35 / 4 Apr. ´15 105,837
8. Shiodome Sumitomo Building Minato Ward 25 / 3 July. ´04 99,913
9. Sumitomo Fudosan Mita Twin Building West Minato Ward 43 / 2 Sept. ´06 98,338
10. Tokyo Shiodome Building Minato Ward 37 / 4 Jan. ´05 95,128
11. Shinjuku NS Building Shinjuku Ward 30 / 3 Sept. ´82 75,046
12. Sumitomo Fudosan Shibakoen First Building Minato Ward 35 / 2 June. ´00 70,381
13. Sumitomo Fudosan Iidabashi First Tower Bunkyo Ward 34 / 3 Apr. ´10 68,454
14. Chiyoda First Building West Chiyoda Ward 32 / 2 Jan. ´04 61,209
15. Sumitomo Fudosan Shibuya Garden Tower Shibuya Ward 24 / 3 June. ´12 59,417
16. Sumitomo Fudosan Aobadai Tower Meguro Ward 33 / 3 Aug. ´09 55,773
17. Sumitomo Fudosan Iidabashi First Building Bunkyo Ward 14 / 2 Mar. ´00 53,205
18. Sumitomo Fudosan Iidabashi Building No. 3 Shinjuku Ward 24 / 2 Oct. ´02 53,047
19. Sumitomo Fudosan Shibuya First Tower Shibuya Ward 25 / 3 Aug. ´10 52,942
20. Sumitomo Fudosan Shiodome Hamarikyu Building Chuo Ward 21 / 2 Aug. ´09 47,951

Note: Figures for gross floor area indicate the area managed by Sumitomo Realty.

OUR PORTFOLIO´S STRENGTHS (As of March 31, 2016)

Sumitomo Realty´s leasing portfolio is highly competitive in terms of the three distinct features of being "close, new and large." Going forward, we will endeavor to maintain and enhance our competitive strengths by focusing on providing high-quality office buildings with these qualities.

LOCATIONS IN THE TOKYO CBD

Our leasing portfolio emphasizes locations in central Tokyo; 95% of our portfolio is in Tokyo´s 23 wards, and 88% is in the Tokyo CBD (Central Business District)*. A location near other office buildings and major train and subway stations is a key condition for a prime property, and our properties´ locations are one of our competitive strengths. In particular, the Tokyo CBD is being developed as an area with a high concentration of office buildings, and stable demand can be expected in this area going forward. We will therefore work to enhance our competitive strengths by continuing to acquire land in this area.
* Tokyo CBD (Central Business District): 7 wards, comprising Chiyoda, Minato, Chuo, Shinjuku, Shibuya, Shinagawa and Bunkyo

BRAND-NEW AND RECENTLY CONSTRUCTED BUILDINGS

The average age of the buildings in our portfolio is 16 years, the lowest figure among major Japanese real estate companies, and 60% of the buildings in our portfolio have been completed since 2000. New buildings are able to generate strong demand by meeting tenant needs in areas like facilities and design, making the relative age of the buildings in a portfolio a key factor affecting leasing businesses.
As shown in the table below, our buildings are equipped with the latest facilities and features, and are popular among tenants for their functionality, comfort, and safety in the event of a major disaster. 99% of our portfolio meets or exceeds earthquake-resistance standards that took effect in 1981, which are a key yardstick for earthquake safety. In recent years, emergency generators that provide electricity in the event of a power outage have also become a feature sought by tenants as part of their business continuity planning.

State−of−the−art Facilities Before 1981 1982−1996 1997 and after
Earthquake protection Previous quake−resistant structure New quake−resistant structure Anti−sway structure
Ceiling height* 2.5 m 2.7 m 2.9−3.3 m
Floor load 300 kg/m² 300−500 kg/m² 500−1,000 kg/m²
Air-conditioning Central air-conditioning system Climate control zones Separate climate control systems
Power capacity 45 VA/m² 60−70 VA/m² 85 VA/m² and over

* Includes raised floors

LARGE-SCALE BUILDINGS

Large-scale buildings with gross floor area of at least 10,000 square meters make up 86% of our portfolio. When a tenant moves, being able to consolidate multiple business offices on one floor facilitates internal communication and reduces space redundancies, helping to make operations more efficient. These types of needs are behind the increased demand in recent years for large-scale buildings with large amounts of floor space per floor.