Japan's Rental Housing Giants FY2026 Full Year: Profit Gap Widens

Four major factors shaped the industry during this fiscal period:

• New housing starts slump: National housing starts fell sharply, down 10.9% year on year.
• Strong rental demand: Occupancy rates for existing residential properties remained extremely high, particularly in urban areas.
• Rising construction costs: Ongoing increases in material and labor costs weighed heavily on construction divisions.
• Higher unit rents: Reflecting broader inflation, rising unit rents have successfully taken hold across the sector.

While the business of "building" new homes faced severe headwinds, the "managing" business anchored the industry.

The clear winner in terms of earnings efficiency this fiscal year was Starts.
The company posted a dominant operating profit margin of 14.4%, leaving its competitors far behind. Its integrated recurring-revenue business model proved highly effective, driving operating profit up 11.2% year on year to 36.3 billion yen.

Conversely, the biggest laggard in terms of net profit was Leopalace21.
Its net profit fell to 14.9 billion yen, a significant year-on-year drop of 16.4%. However, this decline was due to a one-time loss linked to the retirement of its own stock acquisition rights. On an operating level, which reflects core profitability, operating profit surged 23.0% to 36.0 billion yen. The company's underlying earning power has clearly recovered, meaning its health is not as pessimistic as the headline numbers suggest.

To ensure long-term survival, these industry giants are accelerating transitions away from traditional business models:

• Daito Trust's M&A offensive: Moving away from its heavy dependence on apartment construction, the company has acquired real estate firms with strong footprints in urban areas.
• Leopalace21's capital restructuring: The company retired stock acquisition rights to prevent the future dilution of its earnings per share.
• Starts' financial strategy: Leveraging real estate security tokens (STs), the company is pioneering advanced asset recycling methods.

Each company is at a critical turning point as they steer investments toward future growth.

Looking ahead, three major risks warrant close attention across the rental housing sector:

• Sustained inflation in materials and labor: There is a constant risk that companies will not be able to fully pass on rising costs to consumers.
• Impact of rising interest rates: Higher rates could dampen buying sentiment and increase the companies' own financing costs.
• Demographic decline: Over the medium to long term, shrinking rental demand is inevitable, particularly in regional areas of Japan.

This sector remains highly attractive to job seekers and career changers, offering both stability and growth potential:

• Daito Trust offers high stability and immense brand power, backed by its leading position in managed units.
• Leopalace21 offers an exciting, high-stakes environment as it enters an offensive growth phase following its V-shaped recovery.
• Starts is ideal for those wanting a broad education, with opportunities spanning construction, property management, and finance.

Candidates should choose the company that best matches their professional ambitions.