Olympic Front-Runner Tokyo Plans Biggest Project in 42 Years
Tokyo, the front-runner city to host the 2020 Olympics, is planning its biggest housing complex in 42 years to lodge athletes, a move that could benefit developers such as Shimizu Corp. (1803) and Mitsubishi Estate Co. (8802)
The 95.4 billion yen ($958 million) Olympic Village complex would occupy a 44-hectare (109-acre) parcel of land next to Tokyo Bay and would be financed by developers, Kenichi Kimura, who is in charge of the finances for the city’s bid at the Tokyo Metropolitan Government, said in an interview. The government separately plans to spend 153.8 billion yen for new construction and renovations at 11 sites, he said.
Tokyo is ahead of Istanbul and Madrid to be awarded the games when the International Olympic Committee announces its decision on Sept. 7, according to GamesBids.com, a website that tracks the selection process. The village is planned on an area 28 percent larger than Disneyland Park in California and would be Tokyo’s biggest since 1971 when a residential project called Tama New Town was built on the western outskirts of the capital, according to Deutsche Bank AG.
“It would have quite a positive impact for the construction and the real estate market,” Yoji Otani, a Tokyo-based analyst at Deutsche Securities Inc., said. “Construction companies would be able to receive huge orders and the government’s investment in the Tokyo Bay area will help boost land values there.”
The Tokyo Olympic bid committee plans to have chosen developers to build the athletes’ housing complex by mid-2014, with design and construction work starting later that year, according to candidacy documents from the Tokyo government.
The economic effect of the games would be highest for the services industry at 651 billion yen, with the construction industry second with 475 billion yen, followed by the property sector with 152 billion yen, according to IOC estimates. The London Olympics held in 2012 provided a 9.9 billion-pound ($15 billion) boost to business in the year since they were held, according to estimates by officials at U.K. Trade & Investment.
“The economic effect would go to the construction and the real estate sectors first,” Kimura said in the July 19 interview. “A project the size of the Olympic Village would probably require more than one developer, so joint development is likely.”
The Olympics bid coincides with a recovery in the nation’s construction industry after the March 2011 earthquake. Orders rose for a second straight year in the 12 months to March 31 after declining for four consecutive years, according to the Japan Federation of Construction Contractors.
Expectations that Japanese Prime Minister Shinzo Abe and the Bank of Japan’s policies will end 15 years of deflation also have spurred optimism that the nation’s property market will recover.
The Topix Real Estate Index, which tracks 43 property companies, has surged 50 percent this year, while the measure tracking 94 builders gained 27 percent. The benchmark Topix index has advanced 42 percent in 2013.
The real estate index was 0.8 percent lower at the close of trading in Tokyo, while the builders’ index fell 1.2 percent. The benchmark Topix finished down 0.2 percent.
Spending on facilities for the games would be a boon for property companies, Nomura Securities Co. said.
Shimizu, Mitsubishi Estate, Kajima Corp. (1812), Obayashi Corp. (1802), Taisei Corp. (1801), Sho-Bond Holdings Co. (1414), Mitsui Fudosan Co. (8801) and Sumitomo Realty & Development Co. (8830) are among developers and builders that stand to benefit, according to a July 4 report by Nomura’s strategists led by Hiromichi Tamura.
“We think that if Tokyo is selected as the 2020 host city, these stocks will be more likely to outperform the Topix over the next three months,” Tamura said.
Under the plans, the Olympic Village complex, to be located in the middle of two main competition zones, will consist of luxury apartments surrounded by Tokyo Bay, with a view of the Rainbow Bridge that connects central Tokyo with the Odaiba area, which sits on reclaimed land, Kimura said. It will comprise of 10,860 residential units spread across about two-dozen buildings, along with training gyms, dining halls, seaside restaurants and parks, the bid documents show.
The government hasn’t decided what to do with the land if Tokyo fails to be selected, he said.
Tama New Town, which begins about 25 kilometers (16 miles) from central Tokyo and covers 2,853 hectares, is Japan’s largest housing development, according to the Tokyo government’s Bureau of Urban Development. The town was planned in the mid-1960s to cope with an influx of new residents to the capital, the bureau said. The earliest occupants arrived in 1971.
Construction on the 80,000-seat retractable-roof Olympic stadium would begin before other facilities if Tokyo gets the 2020 games so it can also be used as the venue for the 2019 Rugby World Cup scheduled to be held in the city, Kimura said.
The existing National Olympic Stadium, built for the 1964 games in central Tokyo, would be demolished to make way for the new venue, designed by Pritzker Architecture Prize laureate Zaha Hadid, the bid documents show.
Planners intend to select the stadium’s builders by October 2014, with construction beginning a year later, Kimura said.
“I certainly expect to see an increase in activity in the property market as a result of the Olympics,” Toyota Motor Corp. Honorary Chairman Fujio Cho said today at an event in Tokyo promoting the 2020 bid. “Not to mention the Tokyo Bay area development that would be expected.”