CENTURY 21 REAL ESTATE OF JAPAN LTD.

Business Details

A franchisor that provides the brand and system developed by Century 21 Real Estate LLC of the United States to domestic franchisees in Japan. Revenue is derived from three pillars: service fees (linked to franchisee sales), IT service usage fees, and franchise fees. The company provides comprehensive management support services to franchisees, including education and training, IT systems, joint advertising, and financial and insurance brokerage. It operates across five regions nationwide (Greater Tokyo, Kansai, Chubu, Kyushu, and Hokkaido), constituting the company's sole domestic business segment.

Recent Overview

Achieved higher revenue, ordinary profit growth, and net income growth, though operating profit declined slightly due to increased costs

In FY2026 (ending March 2026), operating revenue was ¥4,300 million (up 6.3% year on year), operating profit was ¥1,064 million (down 0.7%), ordinary profit was ¥1,214 million (up 3.1%), and net income was ¥852 million (up 6.3%). While IT service income expanded significantly by 59.2% due to the transfer of IT system assets, operating costs increased 17.4% (IT service costs rose approximately 86.5% year on year) and selling, general and administrative expenses also increased 4.7%, resulting in a slight decline in operating profit. Non-operating income included one-time gains of ¥37 million, comprising compensation received (related to branch relocation) and settlement money received (from a settlement with a withdrawn franchisee), which boosted ordinary profit. Tax credits under the wage increase promotion tax system also contributed to the increase in net income. The number of franchise stores continued to decline on a net basis, with 33 new franchise enrollments and 59 withdrawals during the period, bringing the period-end total to 934 stores (97.3% of the prior-year level). The company fully renewed its new franchise recruitment website for the first time in four years and rolled out new initiatives such as M&A support and the establishment of an International Business Office.

Key Products

Growth Drivers

• Expansion of the existing home market: Demand continues to shift toward existing homes amid soaring new-build prices. The per-square-meter transaction price for existing condominiums in the Greater Tokyo area exceeded bubble-era (September 1990) levels in March 2026, and both transaction prices and volumes for existing detached houses continued to rise
• Structural expansion of IT service income: Recognition of system usage fees has become established following the transfer of IT system assets from the CENTURY 21 Franchise Advertising Fund Association. IT service income expanded significantly to ¥516 million in FY2026 (ending March 2026), up 59.2% year on year
• Resilient growth in service fee income: Despite a decline in the number of franchise stores, service fee income for FY2026 (ending March 2026) was secured at ¥3,583 million (up 2.0% year on year) due to an increase in transaction volume per store. Total transaction value across all franchisees expanded to ¥906,967 million (raw figures in thousands of yen)
• Capturing international transaction demand: In July 2025, the company established an International Business Office and developed transaction manuals and multilingual documents for foreign clients. Amid growing real estate investment in Japan by overseas affluent individuals, the company is strengthening its use of the international network through GREATS21
• Enhanced competitiveness through strengthened franchisee support: The company is expanding franchise benefits through measures such as enhanced AI-based automatic contract document generation, increased advertising spend through its recruitment support system, and the launch of business succession and M&A support (with the first case concluded in July), aiming to curb withdrawals and promote new franchise enrollment
• Complete overhaul of the new franchise recruitment website (December 2025): Enhanced targeted messaging generated response rates exceeding expectations from the first month. The company aims to acquire 55 new franchise stores in the next fiscal year

Risks

• Continued net decline in the number of franchise stores: The store count stood at 934 as of the end of FY2026 (ending March 2026) (97.3% of the prior-year level), continuing a downward trend. This risk of shrinking franchise scale could constrain the medium- to long-term growth of service fee income. The net decline widened, with 59 withdrawals against 33 new franchise enrollments
• Decline in operating margin due to rising costs: Operating margin declined from 26.5% to 24.8%, driven by a significant increase in IT service costs (up approximately 86.5% year on year) and higher expenses for external consulting, website renewal, and personnel costs aimed at strengthening franchisee support
• Outlook for lower net income in the next fiscal year: For FY2027 (ending March 2027), net income is projected to decline to ¥830 million (down 2.7% year on year), reflecting an increased tax burden due to the expected absence of the corporate tax credit effect from the wage increase promotion tax system, as well as the newly imposed special defense corporate tax starting in April 2026
• Risk of rising mortgage interest rates: Mortgage interest rates at financial institutions continue to rise following the Bank of Japan's phased interest rate hikes. This could dampen housing purchase demand, potentially reducing franchisee transaction volumes and commission receipts, thereby affecting service fee income
• Risk of regional disparity in the Kansai area: While the Kansai area's central districts show solid transactions, some suburban areas have seen double-digit declines. The number of franchise stores in the Kansai area fell to 95.0% of the prior-year level (305 stores), the largest decline rate among regions, indicating growing regional performance polarization
• U.S. trade policy and geopolitical risk: Rising import prices driven by U.S. tariff policy trends and geopolitical risks could affect consumer sentiment, creating uncertainty in the outlook for the real estate market