QWhen did you start operations in Osaka and what led you to choose Osaka?

Our presence in Japan dates back to 1999, initially starting out with market research on whether or not our business model which succeeded in North America and Europe would be feasible in the Japanese market, we actually started our development activities in 2001, with our first project in Tokyo, and our expansion into Osaka followed in 2003.

As a distribution facilities provider, having a distribution facility network is extremely important for us. Our customers wouldn't be able to operate effectively if we only offered facilities in the Tokyo area. For most of our customers, their business derives from moving goods from one place/market to another, and therefore, to have only one distribution facility in Tokyo does not work for them from a business standpoint. Consequently, while our first entry into Japan was the Tokyo market, the next logical step was to develop distribution facilities in Osaka/Kansai and further expand our business accordingly.

QHow would you evaluate your business performance in Japan thus far?

The financial crisis that hit us in the latter half of 2008 has affected us all, however, the situation was quite similar in 2001 when we first started our business activities in Japan. At that time, there were scarcely any companies making capital investments, not to mention real estate development activities. There were virtually no competitors, and we could easily acquire land. We had hardly any competitors. The downturn - and like now, 2001 was certainly a downturn - also worked in our favor in a sense that construction costs were very low. Therefore, all in all, I think you could say we picked a very good time to start our real estate development activities in Japan.

The economy recovered steadily over the course of several years, and our business in developing state-of-the-art distribution facilities for lease also gradually started to gain recognition. We were fortunate enough to gain even more visibility due to the fact that some of the major players in the Japanese distribution industry chose to lease our facilities. This allowed us to invest approximately 600 to 700 billion yen in assets in Japan over a comparatively short period of seven to eight years. Thus, up until the second half of 2008, our business was on track.

However, the past year was an extremely challenging year for us, and we focused in leasing our distribution facilities platform. Following our rapid growth since our market entry, we were forced to halt all our plans for new development projects, and were at a standstill. In hindsight, it was a year very well spent, in a sense that it provided us with an opportunity to step aside and look back at what we have accomplished in Japan, and roll out a strategy for the future.

QWhat are the advantages that Osaka has as a distribution hub?

I would say it depends on the type of business you run or the products you handle. Generally speaking, if you plan on having just one distribution hub in Japan, obviously, it depends on the type of products you handle, but the common approach would be to choose to have your distribution hub close to your largest consumer base and/or market. If you import or export your products, it's best to have your distribution facilities near seaports and airports, and as mentioned earlier, near your consumer base/market. Naturally, the best location is a distribution facility that meets all these three criteria.

In this context, in the Tokyo area, it would be the area around Tokyo Bay, from Chiba in the east, through Tokyo and Kanagawa. In Kansai, the southern Osaka area, where Kansai International Airport is located, to the Osaka bay area to western Kobe, the Seishin area, is where there is a high concentration of distribution facilities.

However, all goods do not come through ports and thus, in terms of being close to the consumer base, the Hokusetsu area - northern Osaka - would be one of the major distribution hubs. Although I am not from Kansai and therefore am not too familiar with the area, the Ibaraki and Takatsuki areas seem to be the most attractive and strategic distribution hubs.

QThe greater Osaka Bay area is receiving a lot of attention of late. What prospects and expectations do you have for the area?

We view Osaka as being the gateway to the rest of Asia, as opposed to Tokyo to North America and the Pacific. Osaka, of course, covers all of western Japan, and ten to twenty years down the road, I believe China and East Asia driving the world economy, and if that happens, Japan will undoubtedly be closely interacting with the region, therefore, Osaka's role will be even more important than in the past.

When we talk to our Japanese customers, China always comes up as a topic of conversation. Of course we also discuss the Japanese market as well, but in order to grow as a company, we simply cannot afford to ignore the Chinese market. Moving forward, I think we will be seeing more and more logistics companies and/or manufacturers tying up with logistics companies entering the Chinese market and bringing goods back to Japan, and/or vice versa, distributing products within the Chinese consumer market as well.

QDo you have any advice for foreign companies considering expanding into Osaka?

In terms of the size of the economy, Tokyo, the Kanto region is the largest in Japan. However at the same time, Tokyo could be too large for “beginners”. I believe that for a company taking its first step into Japan, Osaka is the ideal place for the first market entry into Japan, whereby the local government and/or community welcome you with open arms. Historically, Osaka has been a “City of Merchants”, with the entire city having a warm and friendly atmosphere, and in that sense, Osaka could prove to be an important “key” market for any foreign company entering the Japanese market.