PM companies leaving Hokkaido amid Sapporo office market slump

Several real estate property management companies have begun to close down their offices in Sapporo, Hokkaido, as the local commercial market continues to decline.

At the end of March, Jones Lang Lasalle (JLL) will close their Hokkaido branch. Also,  CBRE and the Sumitomo Life Insurance Company will no longer have representatives stationed in Hokkaido. Sumisei Building Management, a subsidiary of Sumitomo Life Insurance, is also closing their office in March as part of cost cutting measures. Sanko Estate currently has one staff member stationed in Hokkaido but all duties will be transferred to Tokyo from spring.

PM companies are responsible for advertising for tenants, negotiating rent, maintaining facilities and so on. JLL opened up their Hokkaido branch in 2007, but took a direct hit in 2008 with the onset of the Lehman Shock. With the closure of their Hokkaido office, a representative from their Tokyo head office will be in charge of their properties still under management in Hokkaido.

As the office rents continue to fall in Sapporo, the number of managed properties are also starting to decrease. Recently, the typical PM role has become more and more fragmented as building owners with lower rents try to reduce costs by negotiating lower commissions and outsourcing building maintenance to specialist companies. They are also trying to source tenants independently.

According to Miki Shoji, the average commercial rent in Sapporo’s business area at the end of November 2011 was 8318 Yen/Tsubo (27,449 Yen/sqm). Office rents are down 18% from 1996, one year prior to the collapse of the Hokkaido Takushoku Bank, and are down 6% from 2007, one year prior to the Lehman collapse.

Many of the PM companies’ main clients – foreign corporations – have also been withdrawing from Sapporo. An employee of a real estate related company in Sapporo City said that they had seen many cases where the building owner had chosen not to renew the PM contract.

With many investors relying on the specialist local area knowledge from PM companies, their withdrawal from Sapporo could further restrict investment into the region.

Source: The Nikkei Shimbun, February 10, 2012.

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