TOKYO -- With its mainstay department store business foundering amid the coronavirus pandemic, Japan's Takashimaya has turned to property development overseas as the company's next engine for growth.
About 6 km from central Hanoi, development of a new urban hub called Starlake is underway. Takashimaya is investing 1.3 billion yen ($12.5 million) into the construction and operation of a K-12 school there in cooperation with Edufit International Education, a Vietnamese school operator.
Takashimaya envisions a roughly 20 billion yen overseas investment spree in total during the next three to four years, largely in the real estate sector. The Hanoi work represents the first foreign property project in which the company has been involved every step of the way, from land acquisition to operations.
The Japanese company also will develop commercial and office space at Starlake between 2022 and 2025, along with two separate large-scale commercial projects elsewhere in Hanoi. Takashimaya will renovate several mixed-use buildings as well that it acquired in Ho Chi Minh City and Hanoi last year.
Takashimaya opened a Hanoi department store in 2016 and has relationships with numerous Japanese brands. The company plans to tap these connections to attract unique tenants for its buildings, setting them apart from those built and operated by local developers.
Expanding the property development business is a top priority, as Takashimaya's department stores faced headwinds from online rivals and slowing tourist traffic to Japan even before the pandemic.
Its department stores in Japan accounted for less than 20% of total operating profit in fiscal 2019, despite making 80% of total revenue -- a sharp contrast to the property development business, which generated about 40% of operating profit on less than 10% of revenue. Department stores, both in Japan and overseas, are only expected to face further challenges from the coronavirus.
Takashimaya also has made inroads into property development domestically. But demand for office buildings and other properties has much more room for growth in overseas markets.
Vietnam, in particular, has been booming in recent years, and its gross domestic product rose 7% for the second year in a row in 2019. The country also logged positive growth in the July-September quarter, having brought the coronavirus outbreak under control early on.
"There's a lot of room for us to expand our portfolio in many different fields in Vietnam," Takashimaya President Yoshio Murata said.