- The Washington Times - Wednesday, December 18, 2002

TOKYO - The changing Tokyo skyline, with shimmering glass towers rising amid the rumble of jackhammers and cranes, belies the fact that this nation is fighting its worst economic slowdown in decades. During the past two years, the Tokyo stock exchange's benchmark Nikkei index has fallen by half, to a 19-year low. The jobless rate is at 5.5 percent, the highest in 50 years. And fears are growing that bad debts will crush the country's megabanks.
But Japan is also in the middle of an ambitious development boom.
Plush complexes of office buildings, luxury hotels, restaurants and boutiques are being built at a furious pace in Tokyo. Office space under construction is up roughly 60 percent from five years ago, according to government figures.
The local media have recently coined the phrase "2003 problem" to describe the expected glut in office space next year and the increase in empty, dark buildings in older parts of the city as tenants move into new quarters.
Some Japanese are even talking about a "2010 problem." In a decade, they fear, the new complexes might grow into ghost towns as Tokyo's working population dwindles by the tens of thousands because of the plunging birth rate.
The construction boom and economic problems are closely linked. The burst of Japan's economic bubble in the early 1990s shattered the myth of continuously rising land prices, and raised questions about real estate as an investment.
"Before, land was something to cling to. People used to think it was best to do nothing with land," said Jiro Okamoto, spokesman for Mori Building Co., which is behind several developments in Tokyo, including Roppongi Hills, set to open in April.
"But that way of thinking has changed. People are starting to realize there's no value in land unless you put it to use," he said.
Now developers are trying to ensure their properties bring in as much revenue as possible.
Roppongi Hills, which includes a movie complex run by Britain's Virgin Group, will accept only businesses that stay open late to provide entertainment, dining and other services for people on the go, including foreigners.
Meanwhile, the decline in prices and the building boom have lured back Western businesses that over the years moved Asian offices to Singapore, Bangkok and elsewhere.
The just-completed Prudential Tower houses the Tokyo headquarters of the U.S. life-insurance company and includes fashionable apartments, a Citibank branch and restaurants.
Property that was previously the Japanese military headquarters and the area surrounding Tokyo Station are being transformed into offices, hotels and stores.
Shiodome, a waterfront project on former national railway property, will have several office buildings, including one for Japan's top advertising agency, Dentsu.
The city government is investing $1.2 billion in Shiodome, including tree-lined roads, parks and a subway station. More than 60,000 people are expected to work there.
Hoping to attract trendy shoppers, a corner of the area is being designed to resemble Italy, with a cluster of brick buildings with columns and a monument-studded square.
The drop in land prices also might change the basic lifestyle of Tokyo residents.
The new vision for developments in the works is to bring the office closer to home, although rents and condominium prices still tend to be high. For decades, Tokyo homeowners have been commuting for two hours or more from distant suburbs, where land was cheaper.
Although development looks to be a success for strategic locations like Shiodome, it's not a story that can be repeated everywhere, said Nobuo Kobayashi, a real-estate appraiser at Japan Real Estate Institute in Tokyo.
"The trend in land prices is twofold. Some are going up while some are going down. And the gap is widening more and more."

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