Possibility of locating R&D spaces outside of Tokyo

In addition to low prices, the transition of the mindset of young workers and relatively loose talent pool supply-demand might make the contrarian strategy effective.

November 17, 2023

Availability of talents and especially those of researchers drive the companies’ R&D (research and development) activities. At the same time, site location is important in promoting the employment of talented researchers. Researchers (in this article, this term includes engineers due to the statistical definition) have a higher proportion of university or graduate school graduates than workers overall in Japan, and they tend to be younger (Figure 1).

Figure 1: Composition ratio of employees by age and percentage of highest educational background, comparing researchers versus all occupations

Source: Statistics Bureau of Japan, Ministry of Internal Affairs and Communications “2020 Population Census”

Additionally, highly skilled people in Japan generally tend to be concentrated in urban areas, particularly in the metropolitan area around Tokyo, and researchers have a similar tendency (Figure 2).

Figure 2: Distribution of number of researchers aged 15 to 64 by prefecture

Source: Statistics Bureau of Japan, Ministry of Internal Affairs and Communications “2020 Population Census”

Based on these observed trends, the best location for R&D spaces should be Tokyo. However, due to cost constraints in the capital’s CBD areas, the actual locations will likely be clustered around Tokyo. Comparing the hypothetical and actual locations, Figure 3 depicts the distribution of 214 corporate R&D bases that were opened or whose opening plans were announced between 1 January 2020 and 31 August 2023.

Figure 3: Spatial distribution of R&D base location plans by companies between January 2020 and August 2023

Source: JLL

The figure shows not only Tokyo and Kanagawa but a wide range of regions within Japan were selected as locations for R&D bases. Although many bases outside the metropolitan area were aimed at linking and maintaining existing bases, acquiring human resources was also an incentive in some cases. For example, the depletion of the pool of talented human resources in the Tokyo area has been cited as one of the reasons that the major semiconductor manufacturing company TSMC opened a R&D base in Osaka last year. In addition, some sites were opened in Hokkaido and Nara Prefecture, suggesting the acquisition of new talent. Although Tokyo has many graduates and researchers, there are also many large companies. Competition to attract talent may be more intense than in other regions (Figure 4).

Figure 4: Ratio of the number of university and graduate school graduates by prefecture, divided by the number of large companies by region

Source: Ministry of Education, Culture, Sports, Science and Technology " FY2022 School Basic Survey",
and the Ministry of Internal Affairs and Communications Statistics Bureau" 2021 Economic Census for Business Activity"

Furthermore, recent research examining demographic trends suggests that young people now have a stronger tendency to stay in their hometowns even after graduating. Additionally, a survey of students who do not wish to find employment locally proposes that more well-paying jobs and more companies with good locations will encourage them not to leave their hometowns. The location of R&D spaces outside Tokyo might attract talent willing to stay in their hometowns, avoiding strict competition for hiring, and reducing real estate-related costs.

As Japan faces a declining population, securing a workforce becomes increasingly important for companies. Although Tokyo will continue to have the highest concentration of jobs, employers might need to attract talent from a diverse geographies because of value shifts and workforce shortages.