Changing Winds Ahead: Japan corporate real estate trends

Changing Winds Ahead
Japan Corporate Real Estate Trends 2013

Jones Lang LaSalle 3
As the CRE function matures and gains
more importance within Japanese
companies, we have created the Jones
Lang LaSalle Japan CRE Index, an industry
first, to compare and contrast the state of
CRE in Japan against the rest of the world.
This index will help monitor the progress
being made by Japanese CRE teams in
furthering their real estate agendas.
We sincerely thank those of you who
shared your thoughts and perspectives.
Your invaluable input has provided a clear
picture of the pressures facing CRE teams
in Japanese companies. These survey
findings reinforce our conviction that there
are tremendous opportunities for Japanese
companies and we are excited to embark
on the CRE journey together.
Introduction
We are delighted to introduce the first Japan
edition of Jones Lang LaSalle’s biennial
Global Corporate Real Estate Trends report,
which provides powerful insights into the
current condition and future direction of
corporate real estate (CRE).
With responses from more than 30
Japanese companies, the survey results
show that amid continuing challenges in the
economic and operating environment, CRE
teams have been charged with tackling a
broader and more strategic agenda, while
often not being adequately structured or
equipped. This mismatch exposes the
CRE function to some fundamental risks.
Mitigating these risks requires change in
the remit, structure and method of CRE.
Without a transformation of the function,
CRE will not be able to keep pace with
the increasing demands of the broader
business nor will it move away from an
undervalued positioning.
However, we believe that with great
risk comes even greater reward. With
the right decisions, CRE can turn risk
into opportunity to drive productivity
enhancements and position the function
as a key contributor to corporate
competitiveness. For CRE functions in
Japanese companies, who are currently
behind the global CRE outsourcing norm on
most fronts, the opportunity to contribute is
even greater.
Toshinobu Kasai
Managing Director/Country Head
Jones Lang LaSalle, Japan
toshinobu.kasai@ap.jll.com

4 Japan Corporate Real Estate Trends 2013
Executive Summary
Towering expectations and inadequate
structures are the conflicting characteristics
of the CRE function in Japan today. Over
the years, CRE teams in Japan have been
facing increasing pressure. Senior business
leaders are placing high expectations in
productivity improvements, both in terms
of increasing output (working better, faster)
and reducing input (operating cheaper).
This focus on productivity improvements
triggers amplified strategic demands placed
on CRE, with a strong emphasis placed on
workplace development. While workplace
transformation is taking on a new resonance
and relevance, more companies in Japan
are looking abroad for growth. CRE teams
are required to provide platforms supporting
business ambitions, mostly in emerging and
frequently opaque real estate markets.
These challenges present risks, in particular
in a background of technology limitations,
capacity caps, strategic skill gaps, frequent
absence of a centralized, dedicated CRE
function and less elevated reporting
lines that all contribute to dilute strategic
alignment. Such structural constraints
may restrict progress. However, emergent
scrutiny and multiplying expectations
are also providing CRE teams with an
unprecedented opportunity to shine if they
demonstrate that they can transform not
only the working environment, but also the
financial contribution and business-wide
positioning of CRE.
A two-pronged approach can help to
mitigate risk and successfully seize
opportunities. Aware that those proactively
leading their organizations to a more
productive workplace will be the winners,
CRE teams are considering new ways to
reach their goals.
Externally, varied paths to outsourcing
are gaining momentum in Japan,
following a trend initiated by global peers.
A new generation of engagement with
service partners is materializing as a
complementary means of delivering on
time and on quality. CRE outsourcing is
starting to be perceived as a strategic
imperative where value derives from long-
term partnership and shared goals. These
new practices are placing CRE in a unique
position to dramatically impact the culture,
performance and competitiveness of their
organizations.
Internally, CRE teams are increasingly
collaborating with corporate senior
executives and other support functions,
these deeper partnerships helping them
to deliver beyond expectations. CRE
executives should venture out of their
comfort zone and work closely with the
other functions to engage both corporate
senior leadership and employees. The next
wave of collaboration will be instrumental
in implementing structural change and
supporting the workplace productivity
agenda.
Many options can be designed to bring
in the skills and capacity needed to fulfill
the intensifying CRE agenda. They all
require a fundamental rethink of the CRE
contribution—one that will shape not
only the future form and function of the
CRE team, but also its opportunity to add
strategic value and deliver competitive
advantage for CRE teams.
The CRE function in Japan is already
showing early signs of transformation and
CRE teams exhibiting a budding willingness
to adopt new behaviors. However, more
has to be done. CRE leaders need to make
a stronger case to gain senior leadership
sponsorship and enroll senior leaders as
champions of the elevation of the function in
companies in Japan.
To make that most-needed step change
happen, the conversation should be started
with the senior leadership, without delay.

Significantly, none of the CRE leaders
and executives responding to our
survey in Japan felt well-equipped to
meet all the senior leadership demands
placed upon their function. A number
of existing constraints can explain this
lack of confidence.
Structural limitations and weak
governance are diluting the strategic
alignment with the business and
undermining CRE efforts to progress
further as a value contributor. In
particular, few CRE teams benefit from
elevated reporting lines with only 26%
of the CRE heads reporting directly to
senior leadership. This is aggravated
by frequent capacity caps, skill gaps
and decentralization of the CRE
function.
Coupled with the amplifying strategic
demands, the inadequacy of CRE
structures raises the possibility of CRE
under-performing, or being perceived
to underperform.
To overcome today’s obstacles and
successfully deliver an ambitious CRE
agenda, CRE teams need to combine
the various strategies at their disposal.
Internally, CRE teams often have a
track record of collaboration with other
business support functions. While this
takes place today more on an ad hoc,
project basis, there are signs that a
more structured form of collaboration
with other support functions is
developing within organizations in
Japan. Among other benefits, shared
services types of integration have
been perceived as an efficient way to
overcome the barriers to workplace
transformation, such as employee
resistance and lack of management
engagement.
Externally, partnering with service
providers to bring in skills and grow
the function is an option increasingly
considered in Japan. CRE outsourcing
is gaining momentum in the country,
although still lagging well behind global
peers. There are both cultural and
organizational reasons for this gap.
Three key trends identified for CRE in Japan
CRE teams in Japan are presented
today with multiple opportunities to
shine.
Senior leadership is increasingly
demanding the function to contribute
to productivity improvements, from
supplying optimum conditions for
growth and competitiveness to
moderating cost savings. Some
workplace productivity enhancement
projects have already been initiated
and the trend is expected to continue to
get stronger in the future.
CRE teams are also required to build
or expand overseas platforms for their
businesses. Emerging economies,
which often are also the least
transparent markets, are attracting
the most interest. Operating in such
challenging conditions is exposing
CRE to the risk of underdelivering
if expectations are not carefully
managed.
Enhanced demands
from senior leadership
present CRE with fresh
opportunities
1
Mismatch between
demand and
capacity results in
underperformance risks
2
Forward-looking CRE
teams stake on winning
partnerships3

of Japanese companies
surveyed believe that
CRE can contribute to the
bottom line
10%
Enhanced Demands from Senior
Leadership Present CRE with Fresh
Opportunities
6 Global Corporate Real Estate Survey 2013
Enhancing productivity
is the new rationale for
CRE with workplace
productivity grabbing
the attention of CRE
and senior leadership
alike
Globally, economic realities and capital expenditure constraints have maintained pressure
on CRE teams to implement short-term tactics, often to the detriment of longer term strategic
moves. This focus has been aimed at bolstering corporate financial performance through
cost savings and/or capital release. Most CRE teams are finding it challenging to continue
achieving year-on-year cost savings targets through tactical means, as most of the easier
opportunities within portfolios have already been realized. A more strategic set of demands is
therefore gaining significance, such as driving improved workplace and worker productivity.
Embracing new work styles and implementing supportive new workplaces has been a
strategic vision, if not immediate intention, for years. This is changing rapidly with workplace
transformation taking on a new resonance and relevance. If backed by management
engagement and employee support—the primary sticking points in implementation to
date—this has the potential to transform not just the working environment, but the financial
contribution and businesswide positioning of CRE, as well.
Japanese companies are not yet that far along the journey compared to their peers in
other developed countries. However, as they realize that their space has a role to play in
contending with competitive pressure, more are starting to consider new workplace strategies
as a path to achieve their goals.
receive increasing demand
from the senior leadership
to reduce direct real estate
costs, 70% to reduce
operating expenses
and 62% to increase
workplace utilization
74% regard lack of managementengagement as the keyconstraint to workplacetransformation. Employeeresistance scored the same
25%
expect demands on
workplace utilization to
increase further over
the next three years
while only a third expect
real estate portfolios to
increase in size
71%An overwhelming majorityface moderate to high
expectations from the
senior leadership to
improve the productivity ofreal estate assets (92%),of the workplace (89%), ofpeople (92%) and of the
business (96%)
Although real estate constitutes a cost by nature, as acknowledged
by the 90% of responding companies in Japan that consider CRE
to be more of a cost center, a minority, and hopefully growing, 10%
are aware that it also presents them with means to bring value to their
organizations.
Over the years, the contribution that is expected from CRE in terms of added productivity and competitiveness for the
benefit of the entire organization has translated into ever increasing demands from senior leadership in addition to—not
in place of—traditional delivery mandates. As challenging as these demands might be, they also represent opportunities.
1

Particularly pronounced in an already cost-focused, global environment, the emphasis placed
on productivity ultimately is one of the key strategies senior leadership can act upon to
encourage and sustain strong corporate performance when growth slows. In Japan, survey
respondents also indicate that reducing direct real estate cost, cutting portfolio operating
expenditure and limiting exposure to future real estate overheads rank high on the senior
leadership priority list.
As a consequence, productivity enhancement is now deeply ingrained in the day-to-day
focus of many CRE teams worldwide and in Japan. Expected productivity outcomes include
reducing and avoiding cost; reducing and managing risk; increasing speed to market; output
quantity and quality; talent retention; collaboration and creativity. Central to the productivity
debate in Japan, improving real estate asset productivity comes first, being a high
expectation for 42% of CRE executives and moderately expected by another 50%
(Fig. 1). Increasingly, senior leadership pressures to improve workplace productivity are also
encompassing workplace, people and business productivity (high expectations in 32%, 29%
and 28% of companies, respectively).
Figure 1: Senior leadership expectations for CRE to deliver respective
productivity outcomes
QUESTION: What productivity outcomes is your organization expecting the CRE function to deliver?
8%
3%
35%
57%
43%
54%
28%
68%
4%
29%
2%
33%
61%
6%
38%
60%
63%
8%8%
50%
42%
7%
41%
52%
10%
43%
47%
24%
72%
4%
31%
66%
3%
32%
57%
11%
No expectation
Moderate expectation
High expectation
AsiaGlobal Japan
Asset Workplace Business People
Among the broadening
range of demands placed
on CRE teams by the senior
leadership, productivity
improvement is a standout
strategic priority

Survey responses leave no doubt as to the fact that CRE portfolios have started undergoing
a process of transformation over the past three years (Fig. 2). Ongoing pressure on operating
costs has led over half of Japan respondents (64%) to increase the utilization rate of space.
Optimizing occupational density has also been a focus, with 48% pointing to an increase in
the ratio of headcount to unit of space, followed by the quality of space that increased for
44% of respondents in terms of design or from an environmental standpoint.
The need to transform the corporate workplace felt by CRE over the last couple of years will
only become stronger over the next three years, in Japan and worldwide. It will be critical for
CRE teams to respond to density and utilization demands without negatively impacting space
quality or worker experience.
Figure 2: Extent of change in the global corporate workplace as seen by Japan
CRE leaders over the last three years and envisaged over the next three years
QUESTION: To what extent has your global corporate workplace transformed over the last 3 years?
Multiple constraints have limited the amplitude of workplace transformation to date, with the
standout limitations recognized by the Japanese respondents being employee resistance and
lack of management engagement. However, one should expect to face these problems as
they are typically present. It is worth noting that while in most countries global respondents
identified financial constraints as the most restricting limitation to workplace transformation,
this was not the case in Japan.
Workplace productivity is
being addressed through
CRE, but there are many who
believe that more could and
ought to be done
Increased
Decreased
AsiaGlobal Japan
overthelastthreeyearsoverthenextthreeyears
79% 78%
7%
9%
71%
4%
68%
65%
12%
8%
64%
9%
72%
15%
62%
70%
9%
53%
17%
42%
33%
19%
59%
17%
36%
48%
32%
16%
58%
15%
31%
4%
73%
5%
76%
4%
48%
6%
67%
5%
67%
8%
44%
61%
12%
48%
4%
Portfolio Quantity Design Quality Utilization Rate Density
0%

is the anticipated net
portfolio growth in Brazil and
in India, followed by China
(32%) and Russia (23%)
35%
Japan respondents are
anticipating a net reduction
of their portfolio at home
(-19%) and in developed
markets such as Canada
(-8%) and Spain (-4%),
while portfolios are expected
to stagnate in the US and
Germany (both 0%)
Central to sustaining growth and competitiveness, the platforms CRE teams are mandated to
provide the business with are geographically selective, and most often focused on emerging
markets. A successful delivery platform in complex and less transparent markets can boost
the status of the CRE function and elevate the recognition of the value it contributes to the
wider business. However, the task also bears the possibility of not being able to deliver to the
stringent time frames and standards of senior leadership. This can expose CRE to one of its
greatest reputational risks if expectations are not managed.
of respondents in Japan
reckon that developing
and emerging markets
will take up less than 50%
of their time over the next
three years
68%
CRE teams are also
required to build or
expand platforms for
their businesses stats
report that their portfolioswere impacted to a certainextent after the 2011 Tohokuearthquake, and 18% toa great extent. 54% haveadjusted (or are planningto) their supply chains as aresult of the disaster
64%
Middle East and Africancountries such as Turkey(20%), South Africa (16%),UAE and Saudi Arabia (both12%) are also experiencingnet portfolio growth
see the lack of political
transparency as the single
greatest challenge when
expanding into these
markets, while 14% rank
the lack of suitable real
estate offer
32%

Figure 3: Level of Risk Aversion in Japan Since 2010
QUESTION: Compared to 2010, how would you rate your business’ attitude toward risk (appetite
for growth versus operational risk)?
Slower domestic growth
triggers overseas expansion
in spite of risk aversion
The strategic significance of
driving revenue and growing
market share in emerging
markets is not lost on senior
leadership
Corporate investment around the world is placing a continuing dual emphasis on building
operational platforms in emerging markets while right-sizing portfolios in developed markets.
Three quarters (74%) of those surveyed in Japan believe that their organizations have grown
more risk averse since 2010 (Fig. 3). This is a substantially more conservative stance toward
risk than their global peers.
Global respondents expect their net portfolio growth in developed western economies to be
either flat-lining or reducing. Japan responses show that a greater proportion of occupiers
are anticipating a plateauing or decrease of their portfolios based in developed western
economies, especially in Western Europe and North America (Map 1).
The BRICs (Brazil, Russia, India and China) continue to receive a lot of attention. Key growth
areas targeted by Japanese headquartered companies over the next three years are largely
expected to be emerging markets where net portfolio growth is anticipated to reach 35% in
Brazil and India, 23% in Russia and 32% in China. Other consensus expansion areas include
the Middle East, Southeast Asia and Central Europe.
While net portfolio growth is predicted to be strongest in emerging markets, these also tend
to be the most opaque (Map 2). Japanese company CRE professionals are increasingly
aware that this paradox could represent one of the greatest reputational risks for their
function. As that operational reality dawns, it will impact CRE teams’ capacity and their ability
to continue to address their extended agenda. Almost a third (32%) of respondents estimate
that they will spend at least one-fifth of their time involved in emerging markets over the next
three years.
15%
30%
44%
22%
27%
30%
21%
18%
34%
7%16%20%
4%5%8%
Slightly more risk averse
Slightly less risk averse
A lot less risk averse
Much more risk averse
No change
Global Asia Japan

Map 1: Net Portfolio Growth Anticipated Over the Next Three Years
Map 2: Global Real Estate Transparency 2012
Source: Global Real Estate Transparency Index, Jones Lang LaSalle, 2012
Not covered
Low Transparency
Opaque
Semi-Transparent
Transparent
Highly Transparent
QUESTION: Over the next three years, how will your portfolio evolve in each of the following regions?
Note: Net portfolio growth percentages in this map are obtained by deducting responses anticipating portfolios to decrease from responses anticipating portfolios to increase.
Other possible responses (“remain the same”, “do not know” and “not applicable”) were left out.
Net Negeative Growth
41%-50% Net Portfolio Growth*
Rest of
region
31%-40% Net Portfolio Growth
Country

Natural hazards are a
consideration that cannot be
overlooked, particularly in
emerging markets where risk
management and prevention
is not a best practice
Over the past few years, Asia Pacific has weathered a sequence of devastating natural
disasters, from earthquakes to tsunamis to massive flooding. They caused innumerable
fatalities and countless houses, plants and communication infrastructures have been
destroyed in the events.
In response to the 9.0 magnitude 2011 Tohoku earthquake, 18% of those surveyed in Japan
report that their portfolios were damaged to a great extent and 64% to a certain extent (Fig.
4). The immense losses have resulted in renewed interest in business continuity and risk
management, with many organizations undertaking recovery works and implementing plans
to mitigate risk of any future natural disasters.
In particular, 54% of respondents from our survey indicate that their companies are either
planning to adjust or have adjusted their respective supply chains. However, only a minority
(15%) state that their organizations have already moved into new headquarters or offices as
a response to the 2011 Tohoku earthquake, or are planning to do so.
Figure 4: Aftermath of 2011 Japanese Earthquake and Tsunami
QUESTION: To what extent did your portfolio suffer as a result of the 2011 Japanese earthquake/
tsunami?
40%
30%
20%
10%
11%
4%
29%
36%
25%
Planning new
HQ or offices
Moved into new
HQ or offices
Planning
adjustments to
supply chain
OthersAdjusted
supply chain
18%
64%
18%
0%
80%
60%
40%
20%
Not at all To a great extent EntirelyTo a certain extent
QUESTION: Which of the following changes have occurred as a result of the 2011 Japanese
earthquake/tsunami?

Mismatch Between Demand and Capacity Results
in Underperformance Risks
CRE teams are being challenged to impact a wider range of agenda items than ever before.
Meeting these heightened expectations is challenging given that investment in up-skilling
existing, or hiring new in-house CRE talent, has not always been adequate. Absence of
strategic skills and an underlying lack of capacity are constraining attempts to imagine and
implement the step change needed.
What is striking about responses from Japan is that uncertainty characterizes the
conditions under which CRE operates and could be the first challenge to
tackle. Indeed, many CRE professionals feel that they are not in control or
do not have a clear CRE mandate, as depicted by the significantly higher
proportion of ‘don’t know’ answers to a large number of survey questions as
compared to global responses. As an example, for workplace development,
25% and 18% of those surveyed in Japan do not know how portfolio quantity
and density will transform in the next three years respectively, while only 5%
of global respondents are unaware of similar developments.
2
report that the global head of
CRE has hard-line reporting
to senior leadership, while
globally 58% report to senior
leadership, also known as
the C-suite
Only
26%
think senior leadership willwant more alignment of CREwith the business driversand functional areas such asHR, IT and finance
32%0%
of respondents regard
themselves as adequately
equipped to meet all tactical
and strategic demands now
being placed upon them
as opposed to the global
average of 28%
consider the ability to
provide data and insights
as the most important
future attributes of CRE
as opposed to only 35%
at the global level. At the
same time, 50% see their
current lack of effective
data and analytics to
measure and articulate
value as a major limitation
75%
regard the current skill setand knowledge base ofinternal CRE teams as aconstraint hindering CREfrom demonstrating addedvalue to the business. 50%recognize the fragmented ordecentralized nature of CREas an additional restriction
36%

No CRE leader in Japan feels
well-equipped to meet all
demands being placed upon
them
The broad range of demands now being placed on CRE professionals is proving
uncomfortable. In stark contrast with global respondents of which 28% indicate they feel
well-equipped to address these demands, none of the Japan respondents believe that they
are (Fig. 5). Although the modesty of Japan respondents and a degree of understatement
can partly explain these answers, they reveal the extent to which CRE teams suffer from their
lack of empowerment.
Survey responses such as capacity, reporting line, planning horizons and alignment with the
business shed some light on why CRE teams in Japan feel so ill-equipped to meet demands
of senior leadership.
Figure 5: Do CRE Executives in Japan Feel Well-equipped to Address Senior
Leadership Demands?
QUESTION: How well-equipped do you feel to meet the demands of the senior leadership?
Japan
Asia
Global
Well equipped to
meet all demands
0%
16%
28%
Can meet
most demands
57%
70%
65%
Ill equipped to meet
the demands
43%
14%
7%

QUESTION: Within what department does the global head of CRE reside?
Many Japanese companies
still lack a dedicated CRE
function
When combined with hard-line reporting into senior leadership, a dedicated CRE function
creates a powerful and helpful alignment between CRE and wider business strategies,
as well as a clear mandate. However, in Japan, a majority of respondents state that the
global CRE head is situated within the corporate office or general management, and less
than a third (32%) have a dedicated CRE department in which the global head of CRE
resides (Fig. 6). On the contrary, the bulk of respondents globally (39%) have a dedicated
CRE department in which the global head of CRE resides. It is also interesting to note that
18% of surveyed companies have no global head of CRE, a finding in line with the often
decentralized and fragmented structure of CRE in Japan.
Figure 6: Where Does the Global CRE Head Reside?
Global Asia Japan
4%1%2%Procurement
0%2%1%Supply chain and logistics
36%25%15%Corporate office/general management
0%7%8%Administration/shared services
39% 32%41%Dedicated CRE department
7%10%10%Finance
4%5%7%Others
18%9%14%No global head of CRE
0%0%2%Human resources
0%0%1%Information technology

Less elevated reporting
lines shield CRE from more
pressure and scrutiny, but
dilute strategic alignment
In only 26% of companies surveyed in Japan does the global head of CRE report directly to
senior leadership, as opposed to 58% of global respondents. In Japan, a majority have hard-
line reporting to the executive level within their organization (Fig. 7).
Remoteness from top leadership can result in a misalignment between corporate strategy
and CRE strategy. Indeed, only a minority of respondents (4%) describe corporate and CRE
strategies as being entirely aligned today, although 18% think that the situation will start
correcting within the next three years.
While only 11% of respondents in Japan acknowledge that they don’t know the time horizon
applied to their companies’ business strategy, a strikingly high proportion (39%) do not know
CRE strategy’s time horizon. Among those who know, 18% report a planning horizon of three
years and above for CRE strategy and 32% for business strategies in Japan. Significant in
Japan, the discrepancy between the planning horizons of CRE and business strategies is
minor (only 1%) in global responses.
Change is expected to be gradual—only 32% of respondents think the senior leadership
will want CRE to align more with overall corporate business drivers in the coming years.
This creates a huge challenge for CRE teams looking to retain or develop relevance within
their organizations. Unlike other regions where the global financial crisis has brought more
senior leadership attention to real estate matters, executive-level reporting in Japan has
kept CRE teams off the radar and shielded the function from higher expectations—a missed
opportunity. Because of this, CRE teams have few occasions to flag real estate issues
or opportunities to senior decision-makers early enough in strategy development. Senior
leadership risks having limited CRE knowledge and moderate expectations because CRE
professionals are not in a position to convey ideas or problems. This may then translate
into unclear CRE mandates and unachievable demands. Further, this lowers the pressure
and scrutiny over the costs, structure and, latterly, the utilization of the real estate portfolio,
depriving the CRE function of a chance to deliver value.
Figure 7: Reporting Lines for the Global Head of CRE
QUESTION: To what level of the organization does the global head of CRE currently report?
Global Asia Japan
C-suite
(i.e., CEO, CFO, CIO, COO, . . .) 26%59%58%
Managerial level
(i.e., president, VP, manager) 13%23%26%
Executive level (i.e., officer,
executive level, supervisory level) 43%13%14%
Operational level
(i.e., administrator, PA, clerk) 13%3%1%
Other 4%1%1%

Structural constraints
present a significant risk
to addressing leadership
demands
Data analytics capabilities is
a crucial factor when looking
to meet mounting demands
Figure 8: Types of Constraints Undermining the Strategic Position of CRE
QUESTION: In your opinion, what are the top two constraints that are hindering CRE from
enhancing itself as a strategic value-add to your organization?
The remarkably high proportion of respondents that feel ill-equipped for the challenges ahead
suggests that new capacity and skills will be required if CRE is to deliver its agenda. Among
the other hurdles pinpointed by survey respondents in Japan, CRE teams are smaller and
half of respondents recognize that broader strategic agendas cannot be fully met without a
more centralized CRE team (Fig. 8).
Without accurate, up-to-date and relevant data, CRE teams find that it is not easy to
execute strategic decisions and meet the varying demands being placed upon their teams.
However, half of the respondents in Japan report that the lack of effective data and analytics
is a key constraint that hinders CRE from enhancing itself as a strategic value-add (Fig.8).
Correspondingly, around 60% of those surveyed agree that they presently have limited
capability to extract real estate metrics, in spite of an improvement since 2010, which was
mainly driven by better data collection. Most agreed that providing data and insights—an
industry-wide concern—is one of the future qualities most required from CRE teams.
36%32%26%Internal skill sets/knowledge
43%32%32%Lack of sustained/consistent C-suite
commitment
7%7%6%Poor vendor relationships
50%34%27%Fragmented or decentralized team
4%29%48%Financial constraints
7%19%19%Others
50%40%34%Lack of effective data and analytics
to measure value
4%7%8%Lack of technology
Global Asia Japan

Forward-looking CRE Teams
Stake on Winning Partnerships
To mitigate the risk of being perceived as underperforming,
CRE teams are entering more and more elaborate
partnerships to gain augmented capacities and diversified
skills. Externally, open models are being borrowed from
countries where outsourcing is more deeply rooted,
while new models are being created to suit specific
circumstances. Internally, cross-functional collaboration
is coming of age, prompted by companywide
productivity agendas. As a prerequisite, CRE leaders
above all need to start the conversation with senior
leadership to engage its members as sponsors of the
CRE transformation.
3
Despite CRE
outsourcing gaining
momentum, Japan is
still lagging behind
global peers
Amplified by CRE’s broader and more strategic agenda, the pressure created by in-house
capacity caps and skills gaps is fuelling growth in the CRE outsourcing market, causing
CRE sourcing to gain traction across more geographies, industry sectors and corporations.
Companies with some experience of CRE outsourcing continue seeking innovative delivery
models that harness greater strategic contributions and best practice from the market. Today,
they are joined by another generation of companies, new to outsourcing, which are taking
varied and sometimes innovative paths toward strategic outsourcing. While some are starting
out with tactical out-tasking, others are progressing quickly by following the paths taken by
the pioneers. The latter is particularly evident in Japan.
are retaining portfolio
strategy work in-house
and none are delivering
this service via a fully
outsourced model
64% of companies choose
within preferred suppliers
instead of sending request
for proposals (RFPs) to all
suppliers, as done by only
4% of them, compared to46% globally
57%
are retaining project
management, build-out and
design in-house, and just
13% have fully outsourced
this service
17%
are currently not
outsourcing any CRE
function as opposed to only
8% globally. When they
do outsource, only 17%
perceive CRE outsourcing
as a strategic relationship
while 21% view it as a
purely tactical transaction
18%
Over the next three years,
property management
and lease administration
are predicted to see
the highest increase in
full outsourcing, with a
4% and 8% increase
respectively
When involved,
procurement is assessed
as lacking CRE
knowledge by
of respondents
73%

Tactical out-tasking versus
strategic partnerships
Overall, a growing number of companies worldwide and in Japan are looking beyond simple
tactical out-tasking and instead are seeking to capitalize on the greater value and synergy
that comes from deeper, strategic partnerships with service providers. In line with global
trend (Fig. 9), among Japan companies that already outsource, a majority (55%) lean toward
the notion that outsourcing represents a strategic relationship where partnership value is
assessed over the long term. However, in contrast with global responses where only a fringe
(15%) see outsourcing as a tactical transaction mainly with the lowest cost supplier, it is 34%
in Japan.
Divergence of attitudes toward CRE outsourcing is sizable in Japan, and many remain
indecisive. As many as 18% of respondents in Japan indicate that they are not outsourcing
any CRE service. When adding those who do not outsource and those who outsource in
a tactical manner, Japan companies appear to be very polarized in comparison to global
responses, which are significantly more amassed toward the strategic end of the spectrum.
QUESTION: Please rate your current attitudes toward outsourcing on a scale of 1 to 5, where 1
means that outsourcing represents a tactical transaction, mainly with the lowest cost supplier, and 5
means that outsourcing represents a strategic relationship.
Figure 9: Attitudes toward CRE Outsourcing
8% 18% 29%
Outsourcing
represents a tactical
transaction, mainly
with the lowest-cost
supplier
8%
Outsourcing
represents a strategic
relationship, where
I assess longer-term
value add with
a partner
38%Asia
38%13% 13%21%
Outsourcing
transaction, mainly
supplier
Outsourcing
relationship, where
value add with
a partner
17%Japan
9% 21% 33%
Outsourcing
transaction, mainly
supplier
6%
Outsourcing
relationship, where
value add with
a partner
30%Global

Figure 10: Delivery of Major CRE Services
Globally as well as in Japan, the balance of services delivered in-house or through
outsourced models is changing (Fig. 10). Specialist and resource-intensive services such as
project management are more willingly outsourced, while the majority of respondents prefer
to retain sensitive elements such as portfolio strategy within the organization.
Over the next three years, further advancement along the outsourcing continuum will be seen
as CRE teams seek more support from the market in delivering both tactical and strategic
real estate activities. Lease administration and portfolio strategy are the services most likely
to be outsourced. Unexpectedly, outsourcing of portfolio and facilities management, services
typically easier to delegate, will progress far less than for portfolio strategy, a function that
CRE teams are more prone to keep in-house. Arguably, an interpretation could be that in
Japan the outsourcing of portfolio and facilities management may be perceived as associated
with the termination of in-house positions, with CRE teams not taking the risk to convey a
wrong corporate image to the public.
A broader range of
solutions are being sought,
creating new models, new
interrelationships and new
points of engagement
QUESTION: How would you best describe the delivery of the following CRE services, today and three years from now? (Fully outsourced being ‘5’ and
fully in-house being ‘1’)
Note: The mean score is calculated as the sum of the multiplication of each score with their respective number of respondents, divided by the total sum of respondents.
Global
Transaction Services Portfolio and Facilities Management PProject Management/Design and
Build-out/Fit-out
Asia Japan Global Asia Japan Global Asia Japan Global
Fully in-house
Fully in-house
Three years from now
Now
22% 16% 25% 12% 9% 17% 25% 13% 23% 52%
2 15% 16% 38% 18% 19% 42% 17% 20% 59% 22%
27% 24% 21% 30% 26% 17% 25% 26% 14% 15%3
21% 22% 13% 22% 15% 13% 19% 23% 5% 8%4
15% 22% 4% 18% 31% 13% 13% 18% 0% 3%Fully outsourced
18% 14% 25% 11% 5% 8% 21% 13% 26% 44%
2 14% 13% 29% 14% 16% 33% 14% 16% 43% 19%
22% 17% 21% 26% 21% 29% 22% 16% 26% 20%3
23% 26% 25% 28% 29% 17% 21% 27% 4% 11%4
23% 31% 0% 22% 30% 13% 22% 28% 0% 5%Fully outsourced

In Japan, 39% of those surveyed describe procurement as being actively involved in CRE,
whether on a permanent or an ad hoc basis. But there are signs that this marriage can be an
unhappy one. For 73% of respondents with involved procurement teams, feel procurement
has too limited knowledge of CRE and of the nature and complexity of the services
being procured. There is a responsibility for CRE teams, and indeed service partners, to
more effectively educate procurement and articulate the added value that effective CRE
management can deliver. The risk of not doing so is that outsourced models will become
price-oriented rather than value-driven, and desired capacity expansion and innovation will
not be realized. This will further limit abilities to meet the broader CRE agenda.
Current procurement practices may also hinder Japan’s quest to close in with global peers.
The type of process used to select outsourcing partners has a direct impact on the market,
with openness usually translating into more intense competition, which in turn accelerates the
maturing of the CRE outsourcing industry. Over half of those surveyed in Japan acknowledge
that their organizations choose among preferred supplier rather than sending a RFP to all
suppliers, with the latter adopted by only 4% of respondents. This stands in stark contrast to
processes in place in most countries, with nearly half of global respondents favoring a RFP
sent to all suppliers when choosing outsourced partners. Furthermore, over three times as
many prefer to select suppliers within their company group in Japan, a practice uncommon
elsewhere and possibly related to the large number of conglomerates in the country.
When uninformed,
procurement involvement in
CRE outsourcing decision-
making creates risks of
undervaluing partnership
and failure to deliver step
change
Portfolio Strategy
Asia Japan Global
Property Management Lease AdministrationEnergy and Sustainability Services
Asia Japan Global Asia Japan Global Asia Japan
58%35%42%48%22% 28% 27%48% 64% 34% 12%
21%14%12%22%39% 19% 20%17% 27% 15% 20%
8%16%14%22%13% 24% 23%16% 0% 18% 21%
13%16%13%9%26% 17% 16%10% 9% 16% 26%
0%19%19%0%0% 11% 15%8% 0% 18% 22%
33%25%31%29%13% 17% 15%28% 22% 26% 8%
17%9%11%21%54% 13% 13%21% 48% 12% 19%
13%10%12%38%8% 29% 27%26% 17% 20% 14%
29%25%19%13%21% 23% 24%16% 13% 19% 28%
8%30%28%0%4% 18% 20%9% 0% 23% 31%

Internally, the increasing focus on workplace transformation also calls for a cultural shift
within the CRE team. It urges teams away from being entirely absorbed by tactical,
transactional task delivery and positions them as change agents and change managers
across the entire business. In complex corporations, effective change can only be delivered
via collaboration. Survey responses clearly show that collaboration between CRE, HR, IT
and finance teams is already occurring with significant and surprising intensity on an ad
hoc, project basis. In the future, continual collaboration—possibly driven by changes in
organizational structures—will be a necessity if the game changing qualities of workplace
transformation are to be realized.
Cross-functional
collaboration is
presenting CRE
an opportunity to
deliver faster, better
services while uplifting
its relevance and
recognition
32%
of global CRE heads reside
within a dedicated CRE
department, which is less
than the 36% residing
within a corporate office
and general management
are collaborating with IT on
an ad hoc or project basis,
with 14% already reporting
a more formalized form of
collaboration or a shared
services type of integration
25% identify shared services
integration as the prevalent
model when working with
HR and finance
36%
claim that their CRE and
business strategies are
entirely aligned today, a
majority (73%) pointing
to moderate or minimal
alignment
Only 4%

As senior business leaders demand a more strategic CRE agenda, notably around workplace
productivity (Fig. 1), CRE teams are being required to exert influence over a broader range of
corporate functions. The workplace transformation that CRE teams is mandated to undertake
has an impact on everyone within the organization, all of the time. Collaboration with other
support functions will become just as necessary as a strong relationship with leadership if
transformation is to be achieved. This will be most required with those support functions that
have a vested interest or valuable contribution to make to the productivity agenda—notably
HR, IT and finance. At present, CRE teams in Japan are working most closely with finance,
while having considerably fewer interactions with HR and IT.
Despite being a standalone function, CRE has a track record of collaboration, although most
of the time this is on an ad hoc and project basis. Concerted action with the various support
functions is already in evidence in the pursuit of current CRE strategies in Japan (Fig. 11),
occurring in most cases between the heads of each of these support functions and without
the practice being necessarily cascaded down—on average, across the three support
functions, 19% of respondents identify collaboration at the functional head level.
Compared to global peers, Japanese companies are substantially lagging behind in terms of
cross-functional collaboration today and they are not expected to close up the gap over the
next three years. This is a variance worth being scrutinized as companies globally seem to
consider a more formally structured collaboration with support services, which is seen as a
new elevation opportunity for CRE.
Rather than perceiving collaboration as a threat to CRE’s influence or specialization, CRE
teams should embrace these formal collaboration structures as vehicles for delivering
positive change across their organizations. We believe CRE teams should be taking a strong
leadership role in these structures to establish creative and productive workplaces.
In adopting a position as a companywide change agent—rather than a tactical specialist—
CRE will extend its relevance and mitigate any risk of becoming marginalized.
Beyond cross-functional collaboration, closer relationships between CRE and corporate
senior executives are critical. Once senior leadership recognises the importance of CRE to
the entire organization and understands the benefits from supporting and investing in CRE,
the function will have reached an optimal position to buoy companywide performance and
productivity.
Workplace transformation
demands greater
collaboration with other
corporate service functions
Figure 11: Extent of Cross-functional Collaboration
QUESTION: Today, how would you describe the collaboration of CRE with the following business
functions?—Today and in three years’ time
Global
HR FinanceIT
Asia Japan Global Asia Japan Global Asia Japan
Three years from now
Now
16% 14% 32% 12% 17% 43% 4% 9% 14%
17% 27% 21% 13% 19% 7% 14% 20% 29%
41% 38% 36% 45% 34% 36% 31% 33% 39%
No/hardly any interactions
Only between functional heads
Ad hoc/project basis
Shared services integration 26% 21% 11% 31% 30% 14% 51% 38% 18%
No/hardly any interactions
Only between functional heads
Ad hoc/project basis
Shared services integration
11% 9% 21% 8% 11% 29% 3% 4% 0%
15% 23% 25% 13% 20% 14% 12% 21% 21%
30% 32% 29% 34% 32% 36% 26% 31% 54%
44% 36% 25% 46% 37% 21% 60% 44% 25%

Jones lang LaSalle’s Global Corporate Real Estate Survey is a biennial global initiative. Concluded in December 2012, the survey collected a
total of 636 responses across 39 countries. Thirty one of these respondents work for Japanese companies. For the purpose of this report, we
analyzed the responses from the 28 Japanese companies located in Japan.
A broad range of industries are represented in our Japan sample base (Fig. 12). While over a third of respondents belong to the manufacturing
and industrial sector, banking and financial services constitute the second largest sample. In terms of company size, more than half are
organizations with 10,000 to 50,000 employees, the rest of the sample offering a variety of other sizes (Fig. 13).
About the Survey
Figure 12: Respondents by Industry
Figure 13: Respondents by Company Size
Note: Respondents working for conglomerates had the possibility to indicate multiple activities.
Global
Asia
Japan
1,000-5,000 5,001-10,000 10,001-50,000 50,001-100,000 More than 100,000
18% 10% 31% 16% 25%
13% 9% 36% 18% 24%
11% 14% 61% 7% 7%
Global Asia Japan
Banking and financial services 32%29%24%
Professional services 4%6%12%
Consumer products 4%9%8%
Technology, media and telecommunications 21%31%28%
Government 0%1%8%
39%Manufacturing and industrial 20%17%
Others 18%22%33%
Energy (includes oil, gas, petrochemicals, energy utilities) 0%4%8%

Annex
What productivity outcomes is your organization
expecting the CRE function to deliver?
Global Asia Japan
Asset
No expectation 10% 7% 8%
Moderate expectation 43% 41% 50%
High expectation 47% 52% 42%
Workplace
Business
People
How has your global corporate workplace transformed
over the last 3 years?
Global Asia Japan
Portfolio Quantity
It has increased 48% 58% 32%
It has declined 31% 15% 16%
It has remained the same 21% 27% 52%
Design Quality
Utilization Rate
Density
To what extent will your corporate workplace transform
over the next 3 years?
Global Asia Japan
Portfolio Quantity
Design Quality
Utilization Rate
Density
Compared to 2010, how would you rate your business’
attitude toward risk (appetite for growth vs. operational
risk)?
Global Asia Japan
No change 21% 22% 15%
Much more risk averse 18% 27% 30%
Slightly more risk averse 34% 30% 44%
Slightly less risk averse 20% 16% 7%
A lot less risk averse 8% 5% 4%
To what extent did your portfolio suffer as a result of the
2011 Japanese earthquake/ tsunami?
Japan
Not at all 18%
To a certain extent 64%
To a great extent 18%
Entirely 0%
Note: because of rounding, totals may not equal to 100

Within what department does the global head of CRE
reside?
Global Asia Japan
Dedicated CRE department 39% 41% 32%
Administration / Shared services 8% 7% 0%
Procurement 2% 1% 4%
Supply chain and logistics 1% 2% 0%
Corporate office / General
management
15% 25% 36%
Information Technology 1% 0% 0%
Human resources 2% 0% 0%
Finance 10% 10% 7%
Others 7% 5% 4%
No global head of CRE 14% 9% 18%
To what level of the organization does the global head of
CRE currently report?
Global Asia Japan
C-Suite (i.e. CEO, CFO, CIO,
COO …)
58% 59% 26%
Managerial level (i.e. President,
VP, Manager)
26% 23% 13%
Executive level (i.e. Officer,
Executive level, Supervisory
level)
14% 13% 43%
Operational level (i.e.
Administrator, PA, Clerk)
1% 3% 13%
Others 1% 1% 4%
In your opinion, what are the top two constraints that
are hindering CRE from enhancing itself as a strategic
value-add to your organization?
Global Asia Japan
Financial constraints 48% 29% 4%
Fragmented or decentralized
team
27% 34% 50%
Internal skill sets/knowledge 26% 32% 36%
Lack of sustained/ consistent
C-suite commitment
32% 32% 43%
Poor vendor relationships 6% 7% 7%
Lack of technology 8% 7% 4%
Lack of effective data and
analytics to measure value
34% 40% 50%
Others 19% 19% 7%
Please rate your current attitudes toward outsourcing
on a scale of 1 to 5, where 1 means that outsourcing
represents a tactical transaction, mainly with the lowest
cost supplier, and 5 means that outsourcing represents
a strategic relationship.
Global Asia Japan
Outsourcing represents a tactical
transaction, mainly with the
lowest cost supplier
6% 8% 21%
2 9% 8% 13%
3 21% 18% 13%
4 33% 29% 38%
Outsourcing represents a
strategic relationship where I
assess longer term value add
with a partner
30% 38% 17%
Organisations that do not
currently outsource any functions
8% 8% 18%
Which of the following changes have occurred as a
result of the 2011 Japanese earthquake/tsunami?
Japan
Planning new HQ or offices 11%
Moved into new HQ or offices 4%
Planning adjustments to supply chain 25%
Adjusted supply chain 29%
Others 36%
How well equipped do you feel to meet the demands of
the C-suites?
Global Asia Japan
Well-equipped to meet all
demands
28% 16% 0%
Can meet most demands 65% 70% 57%
Ill-equipped to meet the
demands
7% 14% 43%

How would you best describe the current delivery of the
following CRE services?
Global Asia Japan
Transaction Services
Fully in-house 22% 16% 25%
2 15% 16% 38%
3 27% 24% 21%
4 21% 22% 13%
Fully outsourced 15% 22% 4%
Project Management / Design and Build-out/Fit-out
2 18% 19% 42%
3 30% 26% 17%
4 22% 15% 13%
Portfolio and Facilities Management
2 17% 20% 59%
3 25% 26% 14%
4 19% 23% 5%
Portfolio Strategy
2 22% 17% 27%
3 15% 16% 0%
4 8% 10% 9%
Property Management
2 15% 20% 39%
3 18% 21% 13%
4 16% 26% 26%
Energy and Sustainability Services
2 19% 20% 22%
3 24% 23% 22%
4 17% 16% 9%
Lease Administration
2 12% 14% 21%
3 14% 16% 8%
4 13% 16% 13%
How would you best describe what you expect the
delivery structure of the following CRE service to be in
three years?
Global Asia Japan
Transaction Services
2 14% 13% 29%
3 22% 17% 21%
4 23% 26% 25%
Project Management / Design and Build-out/Fit-out
2 14% 16% 33%
3 26% 21% 29%
4 28% 29% 17%
Portfolio and Facilities Management
2 14% 16% 43%
3 22% 16% 26%
4 21% 27% 4%
Portfolio Strategy
2 19% 21% 48%
3 20% 26% 17%
4 11% 16% 13%
Property Management
2 12% 19% 54%
3 20% 14% 8%
4 19% 28% 21%
Energy and Sustainability Services
2 13% 13% 21%
3 29% 27% 38%
4 23% 24% 13%
Lease Administration
2 11% 9% 17%
3 12% 10% 13%
4 19% 25% 29%

Today, how would you describe the collaboration of CRE
with the following business functions? - Currently
Global Asia Japan
HR
No/hardly any interactions 16% 14% 32%
Only between functional heads 17% 27% 21%
Ad-hoc/project basis 41% 38% 36%
Shared services integration 26% 21% 11%
IT
Finance
Today, how would you describe the collaboration of CRE
with the following business functions? - In three years’
time
Global Asia Japan
HR
Shared services integration 44% 36 25%
IT
Finance

About Jones Lang LaSalle
Jones Lang LaSalle (NYSE:JLL) is a professional services and investment management
firm offering specialized real estate services to clients seeking increased value by owning,
occupying and investing in real estate. With annual revenue of USD 3.9 billion, Jones Lang
LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of
its clients, the firm provides management and real estate outsourcing services to a property
portfolio of 2.6 billion square feet. Its investment management business, LaSalle Investment
Management, has USD 47.0 billion of real estate assets under management.
About Jones Lang LaSalle Corporate Solutions
A leader in the real estate outsourcing field, Jones Lang LaSalle’s Corporate Solutions
business helps corporations improve productivity in the cost, efficiency and performance of
their national, regional or global real estate portfolios by creating outsourcing partnerships
to manage and execute a range of corporate real estate services. This service delivery
capability helps corporations improve business performance, particularly as companies turn
to the outsourcing of their real estate activity as a way to manage expenses and enhance
profitability.
Acknowledgements
Jones Lang LaSalle gratefully acknowledges the assistance of those CRE professionals
who participated in this survey. We are also grateful to Kadence International, our research
partner for this project.
We welcome any feedback on the published results to continue to improve future editions
and make them as meaningful as possible for our readers. If you have any comments or
would like to participate in future surveys, please email insightteam@jll.com.
Visit www.jll.com/globalCREtrends to explore the global trends in more detail.
See how CRE executives based in your region responded and compare your
answers with the global survey results. Additional reports for specific countries and
industry sectors will be posted to this site as they are released throughout the year.
Toshiro Sato
Head of Strategic Portfolio Services
toshiro.sato@ap.jll.com
Neil Hitchen
Head of Markets
neil.hitchen@ap.jll.com
Jun Miyamoto
Head of Project and Development Services
jun.miyamoto@ap.jll.com
Yoshitomo Tajima
Head of Integrated Facilities Management
yoshitomo.tajima@ap.jll.com
Research for this Index was conducted
by Anne Thoraval and Henry Liao
from Jones Lang LaSalle’s Corporate
Research team in Asia Pacific.

Changing Winds Ahead: Japan corporate real estate trends

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