Turning rent “cost” into “investment.” The “IT version of Tokiwa-so,” where talented engineers gather to work and live

“Food, clothing, and shelter” are essential to our lives. With the spread of COVID-19, remote work has become more familiar. If there is a home that has a positive impact on our work, many of us would probably like to live there.

In fact, an increasing number of companies are now offering housing that integrates work and residence. CEspace Inc. offers “TECH RESIDENCE,” community-style rental housing for engineers and those working in IT. TECH RESIDENCE was born from the idea of how to create a community where engineers could gather. Excellent engineers will come together to live in housing that integrates work and residence and develop their skills by learning from each other. Some of the residents are said to have moved from Roppongi Hills.

CEspace entered into a capital and business alliance with Mitsubishi Estate Co. in May 2021. What kind of vision do the two companies have through the alliance? We asked Mr. Daisuke Wakaizumi, Representative Director of CEspace Inc., and Mr. Shuichi Okino of the Marketing Department of Mitsubishi Estate Co.

Daisuke Wakaizumi
President and Representative Director, CEspace Inc.
Daisuke Wakaizumi joined the Will Group in 2007. After working in temporary staffing and placement sales, agent operations, group graduate recruitment, external seminar activities, and website construction, he proposed the current business internally while setting up the group’s public relations department when the company went public. His proposal was adopted. After establishing a business division, he spun off the company in 2019 and became its representative, working on service development in collaboration with companies and local governments in order to provide value to people involved in the tech field.

Shuichi Okino
Chief of the Co-Creation Marketing Office, Sales Planning Department, Mitsubishi Estate Co. He joined Mitsubishi Estate in 2008. After being transferred to Mitsubishi Jisho Residence, which is engaged in large-scale mixed-use redevelopment projects, office building development projects, and residential projects, he joined the Co-Creation Marketing Office in 2019. In this capacity, he seeks to collaborate with various external players in order to increase the value of the Mitsubishi Estate Group’s existing businesses and create new value from the perspective of “new services” and “new targets.”

INDEX

・The idea for an “IT version of Tokiwa-so” was born in Tokyo, where I was transferred
・To ensure the quality of the community, we dare to raise the bar for moving in
・Compete with software, not hardware. Down-to-earth management is a barrier to entry.
・We’re going to work on regional development
・We want to create a society where talented engineers benefit from their home first
・We want to provide a home where well-being can be enhanced and learning can take place
・Key points

The idea for an “IT version of Tokiwa-so” was born in Tokyo, where I was transferred

–First of all, could you tell us the background to the creation of TECH RESIDENCE?

Wakaizumi: I originally lived in Nara, and came to Tokyo after being transferred to Nagoya. When I came here, I found that people were unfriendly and I didn’t know many people. “It’s not fun,” I thought, but I could not leave. I thought about how I could enjoy my life in Tokyo, and I decided to create a community.
I originally had the desire to create a business, but community tends to be at odds with money and profit. In order to create revenue from sociality, I researched national growth strategies. I thought, “If we cross the direction that Japan is heading with the community, it will inevitably grow,” and that’s how I came up with “IT.”

–I see, this is where the idea of a “community of engineers” was born.

Wakaizumi: There are many kinds of communities, but I feel that the value of “off” time (time outside of work or school) is extremely important. The founder of Facebook discussed the “excitement” among his friends about the “database of women at the university” and sublimated it to develop a social networking service, which became a service used by people all over the world. It is easy to create excitement in people’s minds when they are off work. I don’t think that people can fully express their soul-stirring creativity just because “the company says so” or “the customer wants it.”
So, I asked myself, “Where’s the main place I spend my off time?” and I came up with “residence.” I thought that by combining the place where I spend most of my time with IT, we could create an IT version of Tokiwa-so. At Tokiwa-so, young manga artists such as Tezuka Osamu and Fujiko Fujio came together to engage in friendly competition. Their footprints created the modern manga and anime culture, which is now an important source of foreign currency as it attracts inbound visitors. I thought that if Japan doesn’t have natural resources, we should do the same with IT.

–Wasn’t Will Group, where you worked, a human resources company (CEspace Inc. was spun off from Will Group in March 2019)? Why did a human resources company start a real estate business?

Wakaizumi: We launched a new business by getting the board to agree through a business proposal meeting, and at that time I was able to use the opinions of the mass media to my advantage. Simply saying, “This business has social significance. So, let’s do it” is not impactful. So, I went around to people at TV stations, newspapers, and radio stations and showed them my business plan and asked them, “What do you think about an IT version of Tokiwa-so?”
At the time, I was in charge of public relations for the group, so I was able to come into contact with people from the media in the course of my daily work. When I explained the plan, the response was as I had expected: “It’s new,” “It has social significance,” and “If you implement the project, we’ll cover it.” I submitted these responses to the board of directors, saying “They’re saying this, why don’t we do it?” It may have been a bit of a sneaky way of doing things, but this method of confirming the public’s voice and view allowed me to realize my real estate business while still working for a human resources company.

–After that, how did the partnership with Mitsubishi Estate come about?

Wakaizumi: It all started when I participated in an accelerator program held by Jisho in 2018.
We were already running a tech residence, but we had no real estate knowledge at all. We started the business after getting our housing certification, but since we were late to the game and new to the market, we didn’t have access to property information, and even if we found a good piece of land, we didn’t know how to buy it. We needed a partner in the real estate field to help us develop the “hardware” that was essential for expanding our business.
Community building, which is the value of the Tech Residence, is a labor-intensive business model. In order to create an environment where the resident engineers can engage in friendly competition with each other, the management has to take care of it. I was interested in such software aspects and wanted to work with a real estate player whose direction was similar to mine. Jisho and I were a perfect match in terms of direction, so we decided to partner with them.

–At the time, how did Mitsubishi Estate view the CEspace business?

Okino: The point of contact for the partnership was the “Co-Creation Marketing Office.” In terms of “increasing the value of existing businesses,” which is one of the missions of the Co-Creation Marketing Office, CEspace was a very good partner for us.
Until now, the real estate business model has relied on hardware, but (as is already the case) the key to the future is how we can differentiate ourselves from our competitors through software and other means. In the past, we have developed asset types that are in line with macro trends, such as compact office buildings, but as supply progresses to a certain extent, various developers will enter the market, and in the end, it will become a price war based on profit margins and construction costs.
Tech Residence adds new value to real estate from the perspective of software. We have been waiting for a player like CEspace.

To ensure the quality of the community, we dare to raise the bar for moving in

–What kind of people are currently living in the Tech Residence?

Wakaizumi: Most residents are in their late 20s to early 30s. Most residents work for major IT companies or venture companies.

–By the way, how much is the rent?

Wakaizumi: It’s expensive for a share house, averaging over 100,000 yen.

–It’s asking for a lot.

Wakaizumi: It is our deliberate decision. Of course, we take into account factors such as the location, but if you’re going to do something creative, you need to be able to afford it, and money is part of it. We assume that people who can pay a certain high rent are highly regarded in the company and have the knowledge. As these people come together, they can stimulate each other.
In the past, someone who used to live in Roppongi Hills said, “If I live in the Hills, I won’t have anything left after five years. If that’s the case, then living in a Tech Residence will be good for my career.” Another person who moved into a Tech Residence said, “I can just about afford the rent on my current monthly salary, but I have to,” and improved his skills, changed jobs, and increased his monthly salary.

–Rent is a factor that controls the quality of the tenants. What kind of community do you aim to create at the Tech Residence?

Wakaizumi: It’s not something that can be easily evaluated, but I believe that there are two types of communities: those with low added value and those with high added value. We want to be a “high value-added community.” When you multiply the community by work (IT), you can promote the growth of the residents. As proof of this, I’ve heard that the annual income of many of the residents at our Tech Residence has increased, not just the ones I mentioned earlier.
As a reason for the increase in annual income, everyone says, “Because I can learn skills and techniques from other residents.” At work, it’s hard to ask questions because saying “I don’t know” will affect your appraisal. But when you’re off the job, you can ask questions about this and that, and you can get to know other technical areas.
In addition, eight managers have been born from the Tech Residence. They can have in-depth conversations with their peers, they’ve made friends, and they’ve launched development projects and companies.
Traditionally, rent has been a “consumption” essential for survival, but with Tech Residence, you can turn it into an “investment” to grow yourself.

–I think you need to attract the best engineers. How do you filter them?

Wakaizumi: Share houses, in general, come fully furnished, and there’s no deposit or key money required. Since it’s easy to move in, the tenants change every six months. In contrast, our Tech Residences don’t come furnished, and we do charge a deposit. We also have an interview when they move in, so the threshold is high. That’s why we think we can be a place where people “love.”
We have a one-year residency contract, and we require a mutual agreement between us and our tenants to renew the contract. In order to maintain a good community, for example, we do not accept people with whom we have concerns about causing problems or whose ideas are incompatible with ours. Through these measures, we ensure the quality of our community.

Compete with software, not hardware. Down-to-the-ground management is a barrier to entry.

–From what you’ve said, there seems to be a lot of demand for Tech Residencies. Why hasn’t a player emerged until now?

Wakaizumi: I think there is a structural problem. If you look at the rate of return in the real estate business, 10–20% is the average figure. The payback span for investment is also long, and real estate agents look at things on a 5- to 10-year basis. I think that’s why it’s hard for them to come up with a labor-intensive business like tech residences that requires a quick payback.

Okino: When I explain about the Tech Residence within the company, people ask, “If there are so many engineers, won’t it cost a lot of money for equipment such as 5G?” But in fact, it’s the exact opposite. Mr. Wakaizumi and the residents are working hard to foster a community. Software is the heart of this business, so even if we developers wanted to do it, we couldn’t because it would be too much work.

Wakaizumi: To give you an example, the first residence had trouble once a week. It’s hard to imagine now, but power outages were just the beginning. The air conditioner broke down and the temperature in the room rose to 40 degrees. We had a succession of problems that would develop into serious issues in ordinary rental accommodation. I immediately called a contractor and asked him to repair it, and I took a fan and ice cream and asked the residents if they were okay, and kept saying, “I’m sorry! I’m sorry!”

–From what you’ve told us, it must have been very difficult to run the business. What did you believe in to keep the business going?

Wakaizumi: Because I myself was inspired by talented engineers. The tenants were, for example, the spearheads of GAFA, such as Microsoft and Google, to name a few, and excellent people with graduate degrees from the University of Tokyo, Kyoto University, and Hitotsubashi University told me, “I’ve never lived in a house like this before, and it is fun.” So, I felt confident that there was definitely a need for this kind of house.

–Top engineers earn a great salary and can work from any location. Why did they choose Tech Residence?

Wakaizumi: I think they wanted the level of happiness they could feel outside of work. Even if you achieve well at work, are recognized by the company, and live in a nice house, when it comes time to take time off, everyone is the same. I think Tech Residence is popular because people feel the value of a home where they can be stimulated in their off time and have roommates with whom they can talk about the future.

We’re going to work on regional development.

–I understand that you are now expanding your tech residences to rural areas.

Wakaizumi: We’re still in the planning stages, but we’re in talks with local governments. The local government says, “We want to have contact with talented engineers working in the Tokyo metropolitan area.” It would be great if they emigrated, and by matching them with local companies, we might be able to advance DX. There’s a surplus of real estate and ready-to-use facilities in local areas, so they push us to come anyway.

–What effect would it have to have a tech residence in a rural area?

Wakaizumi: I think that engineers are like blood, carrying fresh information. If you compare Japan to the human body, Tokyo is the heart, and the regions are the tissues at the end of the capillaries. All engineers go to Tokyo to find work, but the more talented people continue to live in Tokyo. If there is a base and a mechanism for movement in the regions, fresh information will reach them, and the mobility of talented people will provide a clue to revitalization.
I also think it will have a positive impact on education. Programming education has already started in elementary schools, but teachers who don’t have development experience can’t teach the “real thing” even if they want to. By sending out talented engineers to rural areas, we may be able to close the education gap.
Engineers can also benefit from this. There is a lot of demand for work in the context of regional development, and you can enrich your personal portfolio by working with local governments. Tokyo is an environment where many talented people find it hard to stand out, but by going to a regional area, you may find yourself in the spotlight. I think there are benefits for both engineers and the local community.

We want to create a society where talented engineers benefit from their homes first.

–Do you have any future plans for the residence?

Wakaizumi: In the future, I’d like to make it rent-free for talented engineers. If there’s an engineer who’s so good that you think, “I want to live with him,” then I think it would be great if all the tenants covered the rent for that person.
I would like to see a society in which talented engineers can enjoy benefits. For example, cheaper food at restaurants, cheaper rent, cheaper shopping, and so on. If the world becomes a place where skills are valued outside of work, there will be more people who want to become engineers. The training of engineers is essential to being globally competitive, and there is a global shortage of engineers. I want to create a world where the skills of engineers are valued outside of the company, and I want to be part of that worldview at the Residence.

Okino: As part of your ecosystem, you have recently started operating virtual residences.

–What is a virtual residence?

Wakaizumi: It’s an online community. There are people who are fans of the Residence but cannot live there because they cannot leave their region or have a family. We want to provide a place for those people to interact with the Residence. The online community is closed to a certain extent, and only people who have met certain criteria can join, so it’s a place for quality connections.
Eventually, I’d like to set up residences all over Japan and connect them virtually to boost the community.

Okino: If we continue to operate the residences, I think there will be people who have to leave because of changes in their life stage if the residences are only for single people. It would be a shame if connections were to be severed there, so I thought it was necessary to create a virtual place where graduates could get involved.
Once we have a community of graduates, we can do things like crowdfunding. We can raise funds and make housing and offices for engineers a reality.

Wakaizumi: As the productive population is decreasing year by year, there will be a surplus of housing, and the value of housing will decrease in relative terms. That’s why we need communities.
Once the equipment is installed, it becomes outdated and loses value over the years. Communities, however, increase in value as the years go by.
Hardware decreases in value over time, and community increases in value over time; CEspace increases the value of the real estate by combining hardware and community.

We want to provide a home where wellbeing can be enhanced and learning can take place.

–Finally, what is the future you both hope to achieve through the Tech Residence?

Wakaizumi: To sum it up nicely, we want to create a world with high levels of wellbeing. If we are to create a prosperous society, education is absolutely essential. Education is necessary not only for children but also for adults.
In this respect, the Tech Residence has an educational element. Both the operator and the tenants can learn from each other, and living together becomes a valuable educational opportunity in one’s life. If we can create a place that provides educational opportunities outside of school, I think rent will turn into an investment instead of consumption.

Okino: As the world changes, Jisho is aiming to transform itself from a mere real estate business to a comprehensive life production business. We want to take a position that says, “With real estate at the core, we have contact with all aspects of life.” That is why we have high expectations for CEspace’s Tech Residences.