Sumitomo Realty & Development Co., Ltd.

Business Details

Led primarily by the Building Business Division and the Urban Development Business Division, this segment centers on Office Building Leasing across Tokyo's 23 wards, and encompasses the La Tour Series (Luxury Rental Apartments), Hotel Business (Sumitomo Realty Villa Fontaine), Event Hall & Conference Room Leasing (Sumitomo Realty Belle Salle), and Commercial Facility Operation & Management. With approximately 2,000 tenant companies, the segment achieves resilience against economic fluctuations and stable earnings through the "Office Department Store Strategy." Segment assets account for approximately 66% of consolidated total assets, making this the core business.

Recent Overview

Achieved record-high profit growth, with the vacancy rate improving significantly to 4.3%.

In FY2026 (ending March 2026), the Real Estate Leasing segment posted revenue of ¥460,637 million (up ¥26,952 million year on year) and operating income of ¥210,181 million (up ¥21,526 million), both record highs. Improved occupancy rates and price increases at existing buildings, along with full-year occupancy effects from buildings such as "Sumitomo Fudosan Nakano Ekimae Building" and "Sumitomo Fudosan Shinjuku Minamiguchi Building," contributed. "Sumitomo Fudosan Roppongi Central Tower," completed in the prior fiscal year, is fully occupied, while newly completed buildings in the current fiscal year, such as "Sumitomo Fudosan Osaki Twin Building West Wing" and "Sumitomo Shiba Koen Building," also show strong leasing progress with occupancy commitment rates exceeding 90%. For the next fiscal year (FY2027, ending March 2027), revenue of ¥480,000 million and operating income of ¥224,000 million are forecast, with record profits expected to continue.

Key Products

Growth Drivers

• Continued penetration of rent increases at existing buildings amid the ongoing tight supply-demand balance in the central Tokyo office market (vacancy rate improved significantly to 4.3%)
• Improved occupancy rates at newly completed buildings such as "Sumitomo Fudosan Osaki Twin Building West Wing" and "Sumitomo Shiba Koen Building"
• Rising unit prices and improved occupancy rates for the La Tour Series (Luxury Rental Apartments)
• Increases in unit prices and improved occupancy rates in the hotel and event hall businesses
• Investment in leasing assets in the Mumbai BKC area of India (a new growth axis under the 10th Medium-Term Management Plan)
• Continuous investment in property, plant and equipment funded by expanding lease cash flow (¥131,647 million in the current fiscal year)
• Continued robust new demand from companies seeking comfortable office environments and those strengthening recruitment (contracted floor area continuing to exceed cancelled floor area)

Risks

• Increased interest expense due to rising interest rates (interest expense rose significantly to ¥27,216 million in the current fiscal year from ¥20,399 million in the prior fiscal year)
• Risk of rising vacancy rates due to increased supply of large-scale offices (trends in new supply in central Tokyo)
• Impairment risk on leased assets (an impairment loss of ¥5,151 million was recorded in the Real Estate Leasing segment in the current fiscal year)
• Foreign exchange and country risk related to the Mumbai, India business
• Risk of declining occupancy rates due to deteriorating tenant business conditions or increased cancellations
• Risk of rising development costs for new buildings due to increased construction costs and prolonged construction periods