As the Ecosystem Engineers, we realize sustainable growth in partnership with society and urban development that we can proudly pass on to the next generation

Updating our strategy and boldly taking on new challenges in response to major changes in the environment

Fiscal 2023 was a year when people’s lives and industry returned to normal as the COVID-19 pandemic came to an end. As society embarked on a new stage, the business environment surrounding us also changed significantly. With the changes in the ways in which offices are used, the value of sharing space in real life has been reassessed, resulting in low vacancy rates in the buildings we manage. Meanwhile, although there are some challenges in promoting our business, such as soaring construction costs, labor shortages, and the impact of rising interest rates overseas, economic activity overall has been revitalized and Japanese society looks to be exiting a long period of deflation. We believe that a trend of stable inflation will be tailwind for real estate companies over the medium to long term and that this is the right time to aggressively take on challenges.

On the other hand, the international situation has become increasingly unstable with ongoing conflicts in Ukraine and Gaza. The world is entering an era of division, and so we must also carefully monitor geopolitical risks.
In these circumstances, we implemented a review of Long-Term Management Plan 2030, launched four years ago in 2020, and updated our strategy in light of the changes in the environment surrounding us. To achieve both of our strategic goals, increasing social value and increasing shareholder value, we reorganized “Be the Ecosystem Engineers,” the Group’s vision of what it wants to be in 2050 as expressed in Sustainability Vision 2050, into a common basic policy for management with two strategic drivers to demonstrate our commitment to further integrating our business activities with sustainability. In addition to that, we adopted the return to basics approach in our strategy for increasing shareholder value as we aim to raise the level of the Group’s “earning capability.”

Reorganizing the key themes related to sustainability

In our strategy for increasing social value, we reviewed the key themes related to sustainability that we established in 2020 and revised them into “Sustainability of the Mitsubishi Estate Group and Society: Four Key Themes.” The four themes are urban development and services, the global environment, respect for people, and value creation. We identified material issues and risks, and opportunities for each theme and presented specific examples of businesses and initiatives (outputs) and the values to be realized (outcomes).

Background to this revision were internal and external stakeholders pointing out the ambiguities in the relationship between our sustainability measures and our business activities and asking how the management resources invested in sustainability are returned as shareholder value. In light of this, the review went back to the question of why the Group is addressing sustainability to reaffirm its significance. The result was simply that addressing sustainability is essential for the sustainable growth of the Group.

Aiming to integrate business activities and sustainability

The perspective of providing value for the next generation will be the key for integrating business activities and sustainability. Due to its very nature, urban development is something we pass on to the next generation, and considering its sustainability hence requires a long timeframe. A building constitutes the history of an urban area and forms a cornerstone for the next generation not only during its development, but also during the period when people are using the completed building and even after it is no longer there. We need to be more aware of the responsibility and impact of providing social infrastructure and engage in responsible business activities and conduct that we can be truly proud of for the next generation. Conversely, maintaining a business that will be valued by the next generation is in itself essential for the sustainable growth of the Group.

I firmly believe that social value and shareholder value are not at all contradictory. As an urban development company, we are only economically viable if we are recognized by society. Our mission statement, which is to contribute to the creation of a truly meaningful society through urban development, precisely connects these two values. Increasing social value through the development of attractive urban areas ultimately leads to growth for the Group. Doing this is not out of the ordinary, but something we have always done as an innate part of our being. This review of our key themes was a process of reaffirming that the creation of social value is at the center of urban development, which is the Group’s core business. In particular, I believe we successfully identified the affinity between urban development and sustainability with the establishment of “pursue tangible and intangible urban development for the next generation” as a theme related to urban development and services.

Meanwhile, as discussion still tends to be focused on economic value and shareholder value in internal decision-making, it is essential to promote an appreciation that the four key themes related to sustainability are simply an extension of our business activities to accelerate our strategy for increasing social value. At the Group, a diverse range of employees work in various departments, and I think in the past it was difficult for many employees to relate their own work to sustainability. However, all of our business activities from development through operation and management, real estate brokerage, and investment management are connected to our strategy for increasing social value. We will encourage all of the Group’s officers and employees to understand that their day-to-day efforts contribute to sustainability and seek the understanding of external stakeholders, including shareholders and investors.

We are already moving toward the integration of business activities and sustainability targets in the annual plans for each business. The Executive Committee is also exploring the creation of new mechanisms for making investment decisions based on how a business will contribute to increasing social value. In addition, the Board of Directors has engaged in vigorous discussions aimed at further deepening sustainability measures, using the reports received from the Sustainability Committee as its starting point.

Creating new businesses based on diverse partnerships

The business environment is constantly changing, and the demands on companies from society are becoming more complex and sophisticated. It is important to be sensitive to these demands in expanding the scope of our business and actively obtain external inputs in order to achieve the long-term management plan and sustainable growth in partnership with society.

The ”Ecosystem Engineers” slogan adopted in Sustainability Vision 2050 is a concept based on co-existence and co-creation. It expresses our aspiration to be a corporate group (=engineers) that provides spaces and infrastructure (=ecosystems) where all actors (individuals, corporations, and more) are able to coexist sustainably and thrive together. To begin with, urban development is not a project that we can complete by ourselves. It only begins to take shape when a diverse range of actors work together, including other landowners, construction companies, tenants, and the local community. We need to constantly think about what kind of partnerships are needed in order to enhance the value of real estate and urban areas.

Over the past few years, we have focused on co-creation with startups as one example of such partnerships. Through a variety of support programs, there are now around 200 startups based in the Marunouchi area (the Otemachi, Marunouchi, and Yurakucho districts). As we attract startups and each company strives for growth, we aim to create open innovation by promoting collaboration among startups and between startups and large companies, as well as seeking organic collaboration with our business. We are also increasing collaboration with academia, including universities and overseas research organizations, and working with a variety of artists to revitalize urban areas. We value interactions with new stakeholders who provide perspectives that differ from those of conventional business.

Promoting management that values dialogue and turns diversity into strength

Although technologies such as AI are evolving rapidly at the moment, it is people who underpin all business activities, and I have once more become aware of the importance of human resources. In order to achieve the long-term management plan and go beyond, it is essential that we create an environment in which every single employee of the Mitsubishi Estate Group can maximize their different capabilities. Each person is a unique individual, and we do not all need to think the same. We want our employees to continue to grow as individuals while valuing themselves and respecting others.

As Ecosystem Engineers, we work with people who have different perspectives, so communication is of the greatest importance. When I was working in the United States, I faced many challenges in communication. Obviously, the idea that people understand what I want to say without me having to say anything did not work for communication, but I even found it necessary to assume that it is not easy to convey what you want to say even when you say it. This is why I believe it is essential to emphasize dialogue and to improve our overall human skills so that we can value ourselves and others, thereby leading to growth potential for the entire Group.

If we consider the provision of value on a global basis, the importance of diversity in human resources is also increasing. We need to design personnel systems that enable diverse human resources to thrive regardless of gender, nationality, cultural background, or other differences. In addition, we have been recruiting specialized human resources in specific fields such as development and digital transformation (DX) over the past few years, and our evaluation systems must adapt to this diversification.

We want to address the issue of gender quickly by increasing the percentage of female managers and taking other measures. However, to tell the truth, there is a gap between this goal and the current situation which has built up over time. To make progress with reform, I feel the challenge is how to ensure that all officers and employees truly come to terms with and understand gender equality. As part of this, in February 2024, we declared our commitment to putting gender equality and women’s empowerment at the center of management by becoming the first Japanese property developer to sign up to the Women’s Empowerment Principles (WEPs), which was also partly intended to give ourselves a push forward in implementing reform.

I feel that the younger generation tends to be more aware of environmental and other sustainability issues, and we want to listen actively to the opinions of young people. As management, we are working hard to further increase communication within the company, and, at the same time, we also hope that employees will not be afraid to speak up. A company where the diversification of human resources fails to make progress cannot overcome change. We will continue to promote diversity with strong determination.

Demonstrating our presence in the world through value creation leveraging “venues”

Looking to the future, we want to demonstrate a strong global presence so that the Mitsubishi Estate Group instantly comes to mind when people think about real estate companies. Due to the nature of our business, our strength is that we have a variety of “venues.” As the Ecosystem Engineers, we will continue to co-create with diverse partners leveraging these venues. The Mitsubishi Estate Group is a real estate company, but our business has already expanded into all manner of peripheral areas, making it possible to provide a wide range of values.

Based on the updated long-term management plan and the key themes related to sustainability, the Group will upgrade its business activities and realize an increase in social value for the next generation. We hope that our stakeholders are looking forward to our initiatives and will provide us with candid feedback. As we deepen communication with our stakeholders, we will move forward steadily as a group that continues to be trusted toward our mission statement, which is to contribute to the creation of a truly meaningful society through urban development.