Kintetsu Corp. (9041), one of the main rail operators in western Japan, spent 130 billion yen ($1.3 billion) and four years constructing the 300-meter (984-foot) Abeno Harukas skyscraper, according to the Osaka-based company. It will surpass the 296-meter Landmark Tower in Yokohama, about 20 miles south of central Tokyo.
The new 60-floor complex, which includes a Marriott International Inc. (MAR) hotel, and a separate proposal for a 500 billion-yen casino resort are the latest attempts to bolster the city’s economy. Rather than tall towers, the metro area of 11 million people may need business zones with fewer regulations, according to Rakuten Securities Economic Research Institute.
“The building will be a success, but total demand won’t improve,” said Masayuki Kubota, chief strategist at the institute. “Osaka should try special economic zones and create new businesses from those zones.”
Japan wants to spur growth by easing restrictions in test zones under economic reforms pushed by Prime Minister Shinzo Abe. The government is considering measures from cutting corporate taxes to loosening building restrictions in the zones.
Osaka, once Japan’s capital, is the birthplace of Japan’s biggest brokerage, Nomura Holdings Inc. (8604), and Nippon Life Insurance Co., the largest non-government life insurer.
The 634-meter Tokyo Skytree broadcasting tower in Japan’s capital is the world’s tallest tower, defined as a structure where less than half the total height is usable floor space, according to Guinness World Records. The world’s tallest building is the 828-meter Burj Khalifa in Dubai, according to the Chicago-based Council on Tall Buildings and Urban Habitat.
Population growth in the Osaka area has stalled in recent years. The Osaka-Kobe metropolitan area’s population is forecast to be 11.3 million next year, the same as in 2005, sliding four places to rank as the world’s 19th largest megacity as it’s overtaken by Beijing, Manila, Cairo and Lagos, Nigeria, according to data compiled by the United Nations.
Tokyo’s metropolitan population is predicted to increase to 35.5 million, retaining its spot as the world’s largest megacity, according to the UN.
Bigger Than Switzerland
The Osaka-Kobe area is still Asia’s third-biggest metropolitan economy, with a gross domestic product of $655 billion, according to figures compiled by the Brookings Institution in 2012. That’s larger than the gross domestic product of Switzerland, according to World Bank statistics.
Tokyo is the biggest Asian metro economy at $1.52 trillion and Seoul-Incheon is second at $774 billion, according to Brookings.
Tokyo’s dominance has contributed to office vacancies in Osaka as companies are drawn to the capital. Mitsubishi UFJ Financial Group Inc., the nation’s largest bank, No. 2 Sumitomo Mitsui Financial Group Inc., and Resona Holdings Inc. all moved banking unit headquarters to Tokyo in the past decade after mergers and reorganizations. Nomura relocated its head office to the capital in 1946. Nippon Life is still based in Osaka, as are Panasonic Corp. and Sharp Corp.
“Tokyo is the headquarters center for an overwhelming number of companies,” said Daita Obata, an Osaka-based assistant manager at real estate brokerage Miki Shoji Corp.
Office vacancies in Osaka’s business districts were 9.45 percent in February, the third-worst of seven major Japanese cities measured by Miki Shoji. Tokyo had the lowest rate at 7.01 percent, according to the Tokyo-based company’s latest report.
“Abeno Harukas has almost completely filled its offices,” Obata said. “However, most of the occupants are coming from the areas around Osaka. It’s not having a big impact.”
Sharp will move some of its sales staff to the new building, said Miyuki Nakayama, a spokeswoman for the electronics maker.
Japan’s dependence on commuting by trains in major cities has ensured profits for rail operators, allowing them to finance large-scale infrastructure projects and enabling Kintetsu to build Abeno Harukas.
Tobu Railway Co. (9001) completed the Tokyo Skytree in 2012, financing the project itself. Last year, a new shopping and office complex opened in the north of Osaka next to West Japan Railway Co. (9021)’s main station, featuring four new towers ranging from 33 to 48 stories and 6 million square feet (557,000 square meters) of space.
Osaka’s newest tower takes its name from Abeno, the area where it’s located, and Harukas, an old Japanese expression that means to brighten or clear up, according to its website. The building’s exterior design was overseen by Cesar Pelli of Pelli Clarke Pelli architects in New Haven, Connecticut, who also designed the Petronas Towers in Kuala Lumpur.
“It will be the first building in Osaka to be bathed each morning in the light of the rising sun,” Kintetsu says on its website. “Visitors to the top floor will be treated to spectacular views seen nowhere else.”
Local officials are in talks with Caesars Entertainment Corp., Genting Singapore Plc and MGM Resorts International to build a gambling complex on reclaimed land in the city’s bay, Osaka Prefecture Governor Ichiro Matsui said in January.
The area is also lobbying to become one of the government’s designated special economic zones, Jiji reported, citing Shosuke Mori, chairman of the Kansai Economic Federation.
There will be a maximum of five zones in Japan, said Tatsuo Hatta, a member of the government council on the zones. Japan may make a decision on the locations this month, Abe said earlier this year.
“Osaka used to be the commercial city and Tokyo used to be the government city,” said Kubota at the Rakuten Securities Economic Research Institute. “As Japan’s original commercial city, Osaka should free lots of restrictions to spur growth.”
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