Updated as of November 2005

Adapting to New Environment for Survival.

The value of total real estate revenue in the year 2000 was 29,905 billion yen or $240 billion down approximately 10 percent from 33,000 billion yen in 1994. The amount represents 6.2 percent of 483,706 billion yen, the total for Japanese gross material products. In 1994, the share of GDP for this industry was 6.8 percent, a considerable decrease in its position in the Japanese economy.

This declining trend in the share of GDP, which continued in the latter half of the 1990s as the bubble economy burst and was particularly severe in the real estate business in Japan, has begun showing its negative effect. However, it has not been reflected as much in the numbers of establishments and employees engaged in the real estate business.

The total number of establishments of all types of real estate business is about 290,38, with the number of employees at 928,000. While in 1996, the corresponding numbers were 292,358 and 934,100. This shows a decline of less than 10 percent in both numbers.

This can be explained by the structure of this industry, with almost 60 percent of total establishments under individual ownership and the remaining 40 percent incorporated. Besides, out of 290,000 establishments only 69 had employees of more than 300, and the vast majority (250,000 plus or 87 percent) had only 1-4 employees.

The most conspicuous phenomenon in the industry was the drastic decline in the price of real estate, particularly in terms of value.

For over 40 years before the mid-90s, only the real estate business trend enjoyed an upward. As Japan's economy evolved into one of the world's largest, demand for real estate far exceeded supply, which had been limited, and the price of commercial and residential space rose sharply until 1990, then gradually leveled and suddenly began to decline as the recession started in 1992. Eventually it fell into deflation.

Changing Characteristics of the Real Estate Business

The abundance of easy credit during the late 1980s caused large numbers of individuals and companies to enter the real estate market for the first time. Although the sudden downturn in the Japanese economy caught many seasoned real estate professionals off guard, it had a disastrous effect on newcomers and their backers, the country's financial institutions. Large established companies are struggling with accumulated non-performing loans, causing a crisis in the banking and related industries.

Real estate firms, large and small, have been forced to adapt to a new environment in order to survive into the 21st century. And change is occurring rapidly.