Company history

In January 1892 Obayashi Yoshigoro, third son of the Osaka dried-goods wholesaler Daitoku, opened a civil-engineering and building contracting business under his own name in Awaza, Nishi-ku, Osaka. He had no trade background, so he built on what a merchant house does have — credit and connections — and won work rather than engineered it. He took the Abe Paper Mill job on 18 January and dates the firm from 25 January, a week later. From that first day he refused to choose between building and civil engineering and carried both, which is the habit the whole company grew out of.

Orders came faster than a sole proprietorship could carry. In 1898 he won the Osaka harbour works — a modern port dredged at the mouth of the Ajikawa, seven years to complete — and in 1903 most of the facilities for the Fifth National Industrial Exhibition, which put him level with the established Kansai contractors within a decade. A Tokyo branch followed in 1906, together with Tatsuno Kingo’s Tokyo Central Station, and in 1909 the business was reorganized as a limited partnership. Then, in 1914, the two extremes finished in the same year: Tokyo Station, and the Osaka Electric Tramway’s Ikoma Tunnel, at 3,388 metres the longest in the East. Ikoma had killed twenty men in a 1913 cave-in and swallowed some ¥8.2 million against combined client-and-contractor capital of ¥6 million, all of it paid in promissory notes that could not be discounted — a job that nearly broke the firm’s cash position and made a Kansai contractor a national name.

The founder died in 1916 and his son Obayashi Yoshio took over. Under the First World War boom the firm incorporated (December 1918), absorbed the partnership in 1919, and began sending engineers to Europe and America — a channel for importing methods rather than inventing them. In the 1923 Great Kanto Earthquake several Obayashi buildings, the Industrial Bank of Japan among them, stood, and its reinforced-concrete work acquired a reputation; in 1927 it completed the Manseibashi–Ueno stretch of Japan’s first subway. In parallel it ringed itself with subsidiaries in the trades it had been subcontracting — joinery and interiors in 1931, road paving in 1933 (later Obayashi Road) — each one widening the range of work it could take on alone.

In December 1936 Obayashi set up a shell, Dai-Ni Obayashi-gumi, with ¥100,000 of capital; three months later the shell absorbed the ¥5 million parent, lifted capital to ¥10.1 million and took the parent’s name. That manoeuvre is why the company’s legal date of incorporation is December 1936 rather than 1892. The extra capital showed up immediately in volume: from 1936 to 1940 Obayashi ranked first in the industry by average annual construction, as banks, trading houses, factories, power stations and bridges all built at once. Then the war took it back. Obayashi Yoshio died in 1943 and his son Obayashi Yoshiro was ordered into the presidency while still on military service; the fifty years the founder had spent climbing to the top of the industry were undone in a few.

Rebuilding began with war-damage repair and Occupation work, and with a branch network reassembled office by office between 1946 and 1948 — Sendai, Yokohama, Sapporo, Hiroshima, Okayama. The Korean War boom did the rest; from 1951 orders came again from every kind of client. The Okinawa base work of 1950 was executed jointly with Kajima and Takenaka, and the Naha airfield with Taisei added — the beginning of the consortium habit that still governs Japanese heavy construction. By 1955 the firm had 3,000 employees and roughly ¥20 billion of annual work, including the NHK building, the Tokyo Station Building, Sanwa Bank’s head office and Kansai Electric’s Himeji thermal plant.

General contractors had kept their shares closed and their management personal. Taisei broke that in September 1956 by going to the Tokyo over-the-counter market; Obayashi followed in Osaka in December 1957, then listed on the Osaka Stock Exchange in December 1958 and on Tokyo in November 1960 — pushed by the working capital that rising volume demanded and by the cost of mechanizing. At listing it had capital of $6.7M (¥2bn), 5,110 employees and $61.9M (¥22bn) of completed works in the year to March 1960, 84% building and 16% civil, with about 70% of orders negotiated rather than bid. With money raised it bought reach and technique: in 1964 it became the first Japanese contractor to station a resident office in Bangkok, and in December 1965 it opened its own research institute at Kiyose in Tokyo, the source of its diaphragm-wall and high-rise methods. Sales went from ¥115.6 billion in the year to March 1965 to ¥286.5 billion by March 1972.

The 1973 oil shock ended the conditions the industry had grown on for thirty years. Public investment stopped rising and Obayashi’s sales fell about a fifth in a single year, from ¥526.9 billion in the year to March 1975 to ¥425.4 billion; net profit slid from ¥8.5 billion to ¥4.3 billion by March 1979, and sales did not clear the 1975 level again until March 1980. The answer was to go outward and upward at once — Thai Obayashi in 1974, the first US public-works contract won by a Japanese builder in 1979, and at home a shift from bidding on drawings to development-planning selling, in which the contractor proposes what the client should do with the land. Sales recovered to ¥847.8 billion by March 1987.

In June 1989 Obayashi handed the presidency to Tsumuro Takao, who had no blood tie to the founding family — an architecture graduate raised through sites and the technical departments, succeeding Obayashi Yoshiro after forty-five years in the chair. Ninety-seven years and three generations of family rule ended not in a crisis but in the middle of the bubble, timed to the centenary and to a self-diagnosis that the firm looked like a dark, heavy civil-engineering contractor; a corporate-identity programme in 1990 gave it a new philosophy and emblem. But the family did not leave. Yoshiro moved to chairman and installed his second son Obayashi Takeo as executive vice-president; Takeo became deputy chairman in 1997 and chairman in 2003. The presidency opened; the centre of gravity did not.

What followed tested both halves of that arrangement. Executives were arrested in 1994 over bribery of the mayor of Sendai, and a former Obayashi managing director told the Fair Trade Commission how bid-rigging in Kansai actually worked; in 1997 Takeo stepped aside and the little-noticed Mukasa Shinji took the presidency. Post-bubble write-offs produced a ¥74.1 billion net loss in the year to March 2002, after which Mukasa argued for profitability over volume, touring the branches to insist that the company demand proper prices. Then June 2007 brought the Hirakata City bid-rigging case: president Wakimura Norio and four other directors resigned, Shiraishi Toru was promoted, and chairman Obayashi Takeo was stripped of representative rights — conceding that he had assumed the firm simply could not fail. Suspension from public bidding cut orders exactly as the post-Lehman slump arrived, and in the year to March 2010 Obayashi posted its first consolidated operating loss, $712.1M (¥63bn), on sales down a fifth to ¥1,341.4 billion.

What pulled Obayashi out of the trough, and out of obscurity, was the Tokyo Skytree. The tower ran on three methods the firm had spent decades on — diaphragm walls, slip-forming and lift-up erection — and it was built directly rather than pushed down to subcontractors, which is why work never stalled even when crews were assembled from whoever was free. Shiraishi Toru said afterwards that the job gave the staff their confidence back. A company founded in Osaka had always been the least-known of the majors in Tokyo, where rivals had deeper local ties; the Skytree made it national. Around it the firm widened its income: it bought the developer Shinseiwa outright in 2011, aiming to grow property to the size of its domestic civil business, and it withdrew from China after the Japan pavilion at the 2010 Shanghai Expo, having concluded it could not work profitably with local trades.

Metropolitan redevelopment and earthquake reconstruction then produced the best figures in its history — consolidated operating profit of ¥133.7 billion in the year to March 2017 and ¥155.5 billion by March 2019, and first place in the industry by sales from 2014. Shiraishi read this not as a boom but as the return of normal competition after the ruinous price war, and put the honest ceiling at a 6% operating margin. The correction came from the same place as before. In December 2017 bid-rigging surfaced on the maglev Chuo Shinkansen; Shiraishi announced his resignation in January 2018 and the company was indicted in March. His successor Hasuwa Kenji came from new businesses such as solar rather than from the building or civil mainstream, and of the four firms referred for prosecution Obayashi alone appointed an outside third-party committee, on the reasoning that an internal inquiry could not satisfy every stakeholder. It also extended the requirement to clear meetings with competitors from the sales division to every employee — the second rebuild of its compliance rules after 2007.

Hasuwa’s other standing instruction was blunter: stop calling building and civil engineering “the core business.” Domestic construction investment was set to shrink with the population, and stacking up contracts could lift neither sales nor margin much further. Renewable energy became one pillar, through Obayashi Clean Energy — mega-solar first, then offshore wind and biomass, treated as a thirty- to forty-year stock business meant to offset the CO₂ the construction business emits. The weakness of contracting duly reappeared: in the year to March 2022 material costs drove the domestic building segment to a ¥8.8 billion loss and consolidated operating profit from ¥123.2 billion to ¥41.1 billion, escalation clauses being hard to enforce on clients and easy for subcontractors to demand. In 2023 Silchester, holding about 4%, proposed a ¥12 special dividend; the board refused, citing $5.0B (¥750bn) of growth investment and a dividend-on-equity floor, and shareholders voted it down.

The buying then began in earnest. Obayashi took the North American water-infrastructure builder MWH for about $133.8M (¥19bn) in November 2023, set up an urban data-centre company in 2024, and on 1 April 2025 installed Sato Toshimi — finance and corporate planning, with a North American posting behind him, and the first administrative-track president from outside the family — as ninth president and CEO. He added the US data-centre contractor GCON in October 2025 and Multiplex, which builds in Australia, the UK and Canada, in June 2026, while committing to a $668.2M (¥100bn) buyback and a 5% dividend-on-equity ratio. Overseas construction sales have doubled in a decade; overseas civil engineering alone jumped from ¥115.4 billion to ¥258.7 billion in the year to March 2025, and overseas work of ¥757.4 billion made up about 29% of the group. The domestic contract itself remains thin — a 9.1% gross margin on building — which is the whole reason for the shopping.