Storm Clouds Gather In Most Parts of Country

Architects are feeling the chill of an economic recession and the effects of the U.S. subprime crisis. Despite an estimated 2.2 percent drop in GDP in 2008, a decrease in housing starts, and a reluctance on the part of banks to lend, design firms large and small are hoping to wait out the storm. Due to its dependence on foreign financing, speculative housing has been particularly hard hit, falling 5.8 percent in December from the year before. As a result, developers are going bankrupt and projects are dying.

Tokyo Zeal in Tokyo, by PAE Design and Facility Management.
Image courtesy PAE Design and Facility Management

But other sectors have slowed without coming to a complete stop. “Sometimes a break is good, since it gives us a chance to take another look at the design and maybe make it better,” says Michel Weenick, president of the Tokyo firm PAE Design and Facility Management. After a six-month hiatus, PAE is moving forward on an auction facility for trucks and construction equipment.

Large developers who are less dependent on foreign money and are engaged in a wide range of projects are faring better than those focused just on housing. Across the board, though, location is key.  Large developments in central Tokyo, like Mitsubishi Estate’s redevelopment of the city’s Marunouchi District, are continuing at a steady clip.

But outside that highly desirable location, clouds are gathering as land values and rents drop. According to the Nikkei Real Estate Market Report, 52 mid-sized office buildings in the middle of Tokyo will finish in 2009, an improvement over the 44 that were completed in 2008 but considerably less than the 92 projected for this year.

In regional cities, lending and new construction are practically at a standstill. "Basically lending has stopped for anything outside of Tokyo," says Weenick.  Architects in Nagoya, Toyota's hometown, are facing a double whammy as diminished tax revenues from poor auto sales have led to budget cuts for existing projects like the public library being designed jointly by Jun Mitsui & Associates Inc. and Pelli Clarke Pelli Architects. Few architects are relying on public commissions these days—a sharp contrast to the 1990s, when public works in the hinterlands sustained many firms after Japan’s economic bubble burst.

Another difference between the two recessions is the current decrease in international work. Instead of looking to the Middle East or China where opportunities abounded until recently, Japanese architects are searching for jobs at home. Branching out into interiors, renovations, urban design and feasibility studies—projects they would have passed on a year ago—has enabled many firms to maintain a sure footing. "It is a great chance for us to expand our capabilities and our client base," says Jun Mitsui.  Not to mention hold onto staff. In Japan, once the land of lifetime employment, layoffs are still infrequent.