Efficiency of small and medium-sized real estate industry --An analysis on the period after the burst of the bubble economy using micro-data

Abstract

The real estate industry is a typical industry that suffered the most damage from the bursting of the bubble economy in Japan and seems to have not yet completely recovered from the severe situation overall. In this article we analyse the industry using comprehensive database which incorporate huge number of small and medium-sized enterprises. We confirmed that the real estate industry as a whole is not in a bad situation, but that the smallest tiers are performing poorly. It can be interpreted as not because of the large number of inefficient firms, but because of the high degree of inefficiency, in terms of inefficiency of firms which is evaluated with the criteria for “zombie” firm in this article. The average profit margin of SMEs in the real estate industry is relatively low, however, the proportion of zombie firms is not necessarily high. The problem is not the ratio of the number of zombies but the performance of zombies in the smallest class. In the real estate industry, relatively large-scale class generally has become out of the post-bubble situation. Improving the profitability of the smallest tier seems to be an unavoidable challenge for improving the performance of the industry as a whole.