TOKYO -- Tokyo's Marunouchi district, home to about 4,300 companies and the workplace of 280,000 people, is, in many ways, the hub of the Japanese economy.
This May, Japanese property developer Mitsubishi Estate surprised the industry with its decision to renovate an area landmark: the 59-year-old Otemachi Building instead of putting up a gleaming new edifice.
Mitsubishi Estate faces stiff competition with developers working to spruce up other districts nearby -- Kanda to the northeast, Yaesu on the opposite side of Tokyo Station and Nihombashi further east.
If Mitsubishi Estate were to tear down the sprawling low-rise building, it could construct a 40-story tower in its place. But Mitsubishi Estate decided to renovate the old structure.
There were two main reasons for this. For one, surveys revealed the Otemachi Building's framework could hold up for another 40 years. Because its concrete was still strong and has suffered relatively little oxidization, the only big upgrade the building needs is to the plumbing.
Another reason for keeping the building intact is the many companies that use it. There are 97 listed companies headquartered in Marunouchi, many of them big ones listed on the first section of the Tokyo Stock Exchange. Sales of Marunouchi-based companies are estimated at 120 trillion yen ($1.09 trillion) annually.
A completely rebuilt Otemachi Building would have attracted big companies and helped Marunouchi's economy grow. But what about startups? Some smaller tenants that are able to pay the rent at the current location would have trouble doing so in a fancy new building.
The rent in a renovated Otemachi Building is expected to be around 40,000 yen per tsubo (3.3 sq. meters) at most. A brand-new building would go for 60,000 yen per tsubo, or 50% more, because of the need to recoup the cost of construction. Many smaller companies would not be able to shell out that kind of money.
A place to call home
The 120-hectare Marunouchi district has been a business center in Japan since the Meiji era, which began in 1868. Until the 1980s, "having a head office in Marunouchi was a sign of a company's creditworthiness. There was even a waiting list of companies wanting to move to offices in Marunouchi," said Takeshi Fukuzawa, an emeritus adviser to Mitsubishi Estate.
These days, a fast-moving economy means tenants come and go more quickly. Even buildings in a prestigious location like Marunouchi are not always fully occupied.
Mitsubishi Estate decided not to tear down Otemachi Building to maintain Marunouchi brand and to provide midsize companies and startups a place to do business. Finolab, on the fourth floor, is a serviced, shared office devoted to fintech companies. The idea is to give these young businesses the opportunity to interact and grow together.
Mitsubishi Estate also opened Global Business Hub Tokyo in its Otemachi Financial City Grand Cube building. Global Business Hub Tokyo is an incubator for companies that someday will move to larger offices elsewhere.
Global Business Hub Tokyo's rents per tsubo are about the same as those of other large buildings in Marunouchi, said Eiko Shimada, who heads a team in Mitsubishi Estate's area brand management department. The hub has large shared spaces for events. The startups that use it are generally required to move to another location within about two years.
Marunouchi's biggest advantage is that many large companies, including those in the Mitsubishi group, are located in the district. Many boast world-beating technology. Being in the area gives startups the chance to interact with these companies, something they might not be able to do elsewhere.