Nomura Real Estate Q1 FY2027: Operating Profit Drops 30% but Full-Year Outlook Intact

Nomura Real Estate’s FY2027 first quarter (April–June 2026) saw revenue drop 13.7% year-on-year to ¥191,064 million, operating profit decline 30.6% to ¥25,540 million, and net income attributable to parent shareholders fall 36.5% to ¥14,728 million — a significant contraction across all profit lines. The main drag was the residential segment, where condominium deliveries decreased, pushing revenue down 14.7% and business profit down 16.9%. Urban development also slumped, with revenue off 21.8% and business profit halving (-50.6%) due to timing of office building sales. The overseas segment swung to a business loss of ¥1,656 million from a profit of ¥132 million a year earlier. Meanwhile, the brokerage & CRE and property management segments grew revenue but saw profit declines amid higher personnel costs. The asset management segment recorded lower revenue and profit on reduced fee income. All segments posted a decline in business profit. Nonetheless, the company maintained its full-year forecast, as property earnings are typically weighted to the second half. Full-year guidance was left unchanged at ¥1,080,000 million in revenue, ¥140,000 million in operating profit, and ¥86,000 million in net income.

The company reports under six main segments plus ‘Other.’

Residential: Revenue ¥101,115 million (-14.7%), business profit ¥15,673 million (-16.9%). Fewer condominium handovers and rising construction costs pressured margins, though the operating margin remained solid at 15.3%.

Urban Development: Revenue ¥48,657 million (-21.8%), business profit ¥5,504 million (-50.6%). The sharp drop reflects the absence of large office building sales that boosted the prior year; a ¥128 million impairment loss was also recorded.

International: Revenue ¥755 million (-4.2%), business loss ¥1,656 million (vs. a ¥132 million profit). Deteriorating project profitability, particularly in the United States, and a stronger yen weighed on results.

Asset Management: Revenue ¥4,249 million (-3.8%), business profit ¥2,883 million (-7.4%). Fee income from REIT management slipped slightly, but the segment’s profit margin remains exceptionally high at around 68%.

Brokerage & CRE: Revenue ¥14,951 million (+2.0%), business profit ¥4,436 million (-15.5%). While corporate CRE advisory demand was firm, brokerage commission income dipped and personnel costs rose.

Property Management: Revenue ¥27,358 million (+4.1%), business profit ¥1,196 million (-34.4%). Expanded property management contracts lifted the top line, but rising operational costs and system investments dragged on profit.

Other: Negligible impact.

Total assets at quarter-end stood at ¥2,836,892 million, up 0.9% from the previous fiscal year-end, driven by increases in other current assets (¥30,091 million) and cash deposits (¥10,164 million), offsetting a decline in real estate for sale (¥9,984 million). Liabilities rose 1.3% to ¥2,034,610 million, as a ¥72,000 million increase in commercial paper and a ¥32,463 million increase in short-term borrowings more than offset a ¥30,924 million decrease in notes and accounts payable. Net assets edged down 0.1% to ¥802,282 million, with the equity ratio largely unchanged at 28.3%. While cash flow statements were not disclosed, the rise in short-term debt suggests working capital needs tied to project execution.

On shareholder returns, the company plans to raise its annual dividend to ¥44 per share for FY2027, a 10% increase from the previous year’s ¥40. The dividend will be split evenly between interim and year-end payments of ¥22 each, reinforcing a commitment to stable shareholder returns. No share buyback or special dividend was announced.

Key risks facing Nomura Real Estate include:

• Residential market sensitivity: Rising interest rates or an economic slowdown could cool condominium demand, directly impacting delivery volumes and margins. Elevated material costs and labor shortages pose additional cost pressure.
• Delayed overseas turnaround: Losses in the international segment are widening, particularly in U.S. projects, calling for a strategic review that may include scaling back or exiting certain markets.
• Lumpy urban development sales: Large office building disposals are inherently uneven year to year, amplifying quarterly earnings volatility. Disposals could become difficult if market liquidity tightens.
• Rising funding costs: Interest-bearing debt exceeds ¥1.6 trillion, and interest expenses surged 17.3% year-on-year to ¥4,951 million in Q1. Further Bank of Japan rate hikes would increase this burden.
• Margin erosion in services: Property management and brokerage segments are seeing revenue growth but not profit growth, as higher personnel and IT costs outstrip gains. Efficiency improvements and pricing actions are urgently needed.

Nomura Real Estate left its FY2027 full-year forecast unchanged from the plan announced on April 24, 2026. The company projects revenue of ¥1,080,000 million (+14.6% year-on-year), operating profit of ¥140,000 million (+1.3%), and net income of ¥86,000 million (+3.8%). First-quarter progress stood at just 17.7% of the revenue target and 18.2% of the operating profit target, in line with the company’s typical seasonal pattern. Large condominium handovers and office building sales are concentrated in the third and fourth quarters (October–December and January–March), giving management confidence in hitting the full-year numbers.

(Prior-year figures rounded for simplicity.)

While the residential pipeline is heavily back-loaded and multiple urban development sales are slated for the second half, the international segment’s recovery remains a key uncertainty. External conditions, including yen volatility and monetary policy, could sway results.