Rebuilding after the bubble without abandoning central Tokyo (1994)

A rebuild that defended the contrarian line

The heart of this rebuild is that the company did not change its basic course in the middle of a crisis. When the collapse of the bubble sank rental earnings, one available road was to rearrange the business mix drastically and travel light. What Sumitomo Realty chose instead was to cut back a bloated organization while refusing to let go of the concentration on central-Tokyo offices that Ando Taro had built by going against the market. Continuing to develop and acquire buildings in central Tokyo even while booking extraordinary losses and falling to a net loss suggests a reading that a period of falling prices is precisely the moment to stock up on good locations.

That said, the line could be defended only because Ando-era preparation had left the company leaning on leasing, where the damage was comparatively light. A chairman who called the recession “graduate school for managers” and reflected on it as such, and a president risen from the operating floor who had no hesitation about restructuring, supported the rebuild from both sides. The depth of the wound and the nerve to hold the course are sometimes separated by very little. The subsequent growth in the company’s leasing earnings bore the judgement out in the event — but had the fall in prices dragged on longer, the verdict could have gone the other way.