JLL's project management supports development-type investment by Foreign Investor
More and more foreign investors are developing properties themselves when they cannot find any existing properties that are suitable to invest in. However, the construction companies that undertake these developments do not support any languages other than Japanese.
Foreign Investors Are Developing Lifestyle Hotels in Tsukiji
Converting business hotels under construction into lifestyle hotels
Tsukiji Market was called the "Kitchen of Tokyo." Although the wholesale market relocated to Toyosu last October, the Outer Market is still open for business and draws many foreign tourists. In this Tsukiji area of Tokyo, TSUKI—a lifestyle hotel that offers a Japanese cultural experience—opened in April 2019. With 10 floors above ground, a total floor space of 1,213.82 m2, and a lot area of 194.56 m2, it is a medium-sized hotel. With AYERS Hospitality LLC (AYERS) as the project owner, TORAO+ HSIEH ARCHITECTS did the architectural design, and JLL Japan's Project and Development Management Department undertook the project management.
Architectural design that showcases Japanese culture
Under the concept of "NIPPON SAVVY," the designer duo focused on a design that incorporates "wagokoro"— the traditional Japanese spirit on which Japanese culture is based. First, the hotel's unique exterior catches your eye. Its front outer wall has a "crinkled" pattern which recreates the distinctive crinkly texture of washi (traditional Japanese paper). The designers randomly crumpled a piece of washi paper and created a mold using the crinkles. They poured molten aluminum into the mold to create cast aluminum panels. The hard aluminum material with the soft features of washi paper creates a one-of-a-kind atmosphere. In addition, public spaces such as the hallways are decorated with indigo fabrics and other Japanese materials. These high-quality, sophisticated interior design features showcase the unique charms of Japanese culture.
The hotel's first and second floors are common spaces, and the third to tenth floors are guest rooms. Along with the reception desk, the first floor has Sake-Bar, a networking space which serves Japanese sake. At the center of the bar is a large, wooden table which serves as a point of contact between the hotel guests, the hotel, and local residents. Its most impressive feature is the use of a traditional Japanese woodworking technique called "naguri," in which marks are left on the surface of the wood with carpentry tools and used as a design. The bar offers a wide array of the best Japanese sake from around Japan, and takes pride in selecting amazing tableware, too. They let you try different ways to enjoy Japanese sake. On the second floor, there are private baths where guests can have a taste of Japanese bathing culture. With two private baths made with fragrant Aomori hiba cypress and rest areas too, the hotel offers a space for relaxation where guests can fully take in Japanese bathing culture.
The hotel has 31 guest rooms in total. There are five types including singles, doubles, and twins. In anticipation of stays by families of foreigners who have a larger build, most of the guest rooms have been made spacious with extra room. Their floor areas are over 24 m2—almost double the original design. The interior's color scheme utilizes a palette of calm, traditional colors of Japan, and the use of a lot of wood adds to the impression. Many of the guest rooms have a cypress bathtub.
It was expected that the majority of the hotel's guests would be foreign tourists, but as Toshiki Sakaguchi of AGORA Hospitalities, which manages the hotel, reflects: "We get more Japanese guests than we expected, and I feel that the hotel's concept is highly appreciated by many people from both inside and outside Japan." He says they have maintained occupancy rates of over 70% ever since right after opening, and are enjoying a good start.
Far-reaching changes to the original development plan
With Ginza (one of the top commercial districts in Japan) within walking distance and Tsukiji Outer Market (which supports Japanese food culture), the Tsukiji area has attracted a lot of hotel development projects in recent years. Conspicuously many of them are profitability-oriented "accommodation-only" hotels—what we call "business hotels." In fact, this TSUKI project was also originally planned to be developed as a business hotel, but then AYERS acquired the project and everything that came with it, and decided to change the design into a lifestyle hotel in order to differentiate it from competitor hotels. "We focused on the characteristics of the Tsukiji area," explains Kin-Man Tsin of AYERS, talking about the reasons behind the change of plan. "We thought that we should provide a special hotel which respects the local history and offers inbound travelers an experience of local culture—not merely a place to stay the night." However, when the change of plan was finalized, there was a huge gap between the construction schedule the construction company presented and the scheduled opening date AYERS wanted. How to fill the gap became a major challenge.
Erina Watanabe of JLL Japan's Project and Development Management Department, who was involved in the TSUKI's development as a project manager, looks back on the project: "When we develop a building, the rule of thumb is to start the construction work after completing the architectural design. With this project, however, we needed to discuss the details of changes to the interior and exterior design and the architectural design as we continued to build the structure. So, we were often faced with situations where quick decisions were required to ensure that reworking would not occur. I did my best to take quick action to help the project owner find the optimum solution, by stepping into the project owner's shoes, managing approval schedules, costs, and future potential risks, organizing issues, and proposing solutions for them."
Besides, the investor in this project is based in Hong Kong and is not fluent in Japanese, let alone having no base in Japan. How could they smoothly manage the Japanese parties involved in the construction and make applications and undertake other procedures according to the relevant laws and regulations? Kin-Man: "The biggest challenges in investing in the Japanese market are the legal system and language." As he points out, they needed to remove these two concerns.
To address these challenges, JLL not only checked the Building Standards Act, but also provided assistance with matters related to the regulations and applications that come with actually running a hotel, including the Inns and Hotels Act, which is indispensable for a hotel business. JLL Japan drew on the extensive knowledge and expertise that it has built up through working on numerous hotel development projects in order to help in completing the project and developing an environment in which the hotel could smoothly start operating after opening. In addition, JLL is a global agency and has a lot of Japanese-English bilingual human resources, so there is nothing to worry about regarding the language issue, either. As an agent for a project owner whose first language is English, JLL staff provided a bridge between the project owner and construction companies, coordinating with the construction companies and assisting in placing separate orders.
Provided support with running the hotel, too
In addition to the "hard" aspects of the hotel (such as its architectural design), JLL is also involved in developing program plans that will help in building a closer relationship between the hotel and the community. One of the features of a lifestyle hotel is that it offers guests a chance to experience the community's local characteristics. TSUKI hotel has built a cooperative relationship with long-standing restaurants and other establishments in the neighborhood and has devised a strategy to enable its guests to experience the local traditions. "We presented ideas together with the project owner and designers on how we could offer guests experiences that made the most of Tsukiji's characteristics," says Wataru Noguchi of JLL Japan's Project and Development Management Department. One of the examples was tying up with long-standing sushi restaurants, boxed lunch shops, and other businesses in the hotel neighborhood and offering boxed meals for room service. In this manner, the hotel takes approaches that eye enhancing cooperation with the community.
Of all the major real estate markets around the world, Tokyo is by far the most stable and fair, regardless of what category investors belong to. It also has an appealing yield gap thanks to the low interest rates, and foreign investors' motivation to invest in it is ever increasing. On the other hand, the entrance of a great number of investors has brought about a chronic lack of properties, and they have a hard time finding a property that is suitable to invest in. Against this background, the TSUKI project was a development-type investment by a foreign investor, rather than an investment in an existing property. With the lack of properties, more and more foreign investors are turning to this kind of development-type investment. However, development-type investment comes with the abovementioned challenges that are unique to Japan. JLL's project management service may be the key to a solution.