MITSUBISHI ESTATE Annual Report 2014

our ability to envision the future and our approach of creating value from a long-term perspective remain the unchanging cornerstones of our business model. Without these corner-stones, even with the necessary land and funds, it would be impossible to achieve our style of real estate development.The urban development Mitsubishi Estate has achieved in its core business of the Marunouchi district represents the embodi-ment of those abilities—correctly envisioning and shaping the future and creating value from a long-term perspective. We have been developing this district in the center of Tokyo for more than a century, using a business model that continually emphasizes redevelopment of the district in line with the needs of the times. Extending over approximately 1.2 million square meters, the district is unparalleled in size as a development project. And it is this scale that has enabled the unique evolution of the Marunouchi district.Recently, real estate developers from various cities in Asia have visited us to see the Marunouchi development for them-selves. When we show them around the district, many express a desire to partner with us in projects to achieve the same type of development in their own cities. Clearly, even for professional developers, Marunouchi has a strong appeal that instills a desire to develop other areas in a similar manner. That appeal includes a development style that creates a sense of unity among sky-scrapers packed with the latest innovations and the retail shops and restaurants, museums, and plazas sprinkled throughout the district as well as the appeal of the high levels of energy generated by the businesspeople working in the district—the drivers of Japan’s economy.To begin with, during the initial period in the development of the Marunouchi district, our development concept was not to build office buildings but to produce and manage a major business center—an idea that is symbolic of Mitsubishi Estate’s approach. We believe that by anticipating the changing times and continuing to develop an area in response to the needs of an as-yet-unrealized society of the future, we amplify the area’s added value, which in turn enhances our corporate value. Changes in the Business EnvironmentI have started with an introduction of our management vision to enable readers to gain an understanding of the special features of our business. Before reporting on our business performance and our medium-term management strategies, I would like to explain our view of the medium- to long-term business environ-ment on which our performance and strategies are premised. We are cautious about the medium-to-long-term business environment. On a macroeconomic level, we see the changes in demographics, specifically the decline in the working popula-tion, as having negative impacts on the real estate market. These impacts are both direct and indirect. Directly, the changing demographics, such as the declining population and smaller families, will result in a contraction of the housing market. Indirectly, a smaller working population leads to a decrease in economic activity, which could put downward pressure on office lease demand.Furthermore, given the rapid economic development of Asian countries, competition for the role of Asia’s regional economic hub has intensified between Tokyo and various Asian cities, such as Singapore, Hong Kong, and Shanghai. Already, we have seen some global corporations move their Asian headquar-ters to Singapore because of its geographic proximity to other Asian countries, low corporate income tax rates, and facility with English as its language of business. Therefore, Tokyo urgently needs to establish its predominance as a global city. This is not a status issue—over the long term, with Japan’s population expected to decrease, we believe that it is essential for the country’s continued economic development to attract overseas corpora-tions and skilled human resources. For that reason, reinforcing Tokyo’s global competitiveness is an extremely critical strategy.ANNUAL REPORT 201413