Finally a Reversal? The New Common Sense in the Construction Industry

[Conclusion] The power dynamic in the construction industry, which was previously 'Client > General Contractor > Subcontractor,' has completely reversed. The cancellation of the Nakano Sunplaza redevelopment project is merely the tip of the iceberg.

Many of you were likely surprised by the news that the redevelopment of Nakano Sunplaza, a place beloved as a 'sacred site for music,' had been scrapped. In reality, this is rooted in a major structural change currently taking place within the construction industry. I will explain in detail the new 'power dynamic' in the construction industry as seen through this case.

What happened?

In the Nakano Sunplaza redevelopment project, Nomura Real Estate was to lead the project, with Shimizu Corporation handling the construction. However, in August 2024, the final estimate submitted by Shimizu Corporation was a staggering increase of approximately 90 billion yen from the initial plan. This meant the total project cost would balloon to 354 billion yen, roughly double the original estimate.

Nomura Real Estate pushed back, calling it 'out of the ordinary,' but Shimizu Corporation stood firm, stating that 'minor changes cannot lead to significant construction cost reductions.' As a result, in October 2024, Nomura Real Estate withdrew its application for the redevelopment project, and the plan was officially scrapped in June 2025.

Technical Term Explanation: Subcontractor
Short for 'subcontractor,' these are specialized construction companies that take on work from general contractors. They are companies with specialized skills in fields such as electrical equipment, air conditioning, and elevator installation. For example, elevator installation for skyscrapers requires special technology, and only a limited number of companies can handle it.

Structural Changes in the Industry

Traditional Power Dynamics

The construction industry has historically had a clear hierarchical structure:

• Client (Developer): At the top, holding the power to determine prices

• General Contractor: Overseeing the entire project as the prime contractor

• Subcontractor: Following instructions as a subcontractor

Industry insiders often described this as a 'lord and vassal relationship,' as the hierarchy was so distinct.

Current Power Dynamics

However, as of 2024, this structure has completely reversed. Multiple general contractor insiders have testified that 'in terms of power, subcontractors are now above general contractors.' In fact, at Daiho Corporation, a situation occurred where a subcontractor suddenly abandoned work during the final stage of construction, leading to a 1.6 billion yen loss.

Technical Term Explanation: 'Risk Information' (Osore-joho)
A custom in the construction industry where information regarding risks that could affect construction costs, such as rising material prices, is shared in advance before a formal estimate is issued. It is a mechanism to convey the possibility of future cost increases, such as 'the cost of this item will rise over time.'

Why did it reverse?

1. Severe Labor Shortage

The construction industry continues to face a chronic labor shortage. In particular, skilled craftsmen in specialized fields are rare. Demand is overwhelmingly outstripping supply.

2. Impact of the 2024 Problem

From April 2024, caps on overtime work have been applied to the construction industry as well. In construction sites where project schedules were previously adjusted through long working hours, the amount of work that can be handled by the same number of people has decreased significantly. As a result, competition for human resources has intensified.

3. Support from the Revised Construction Business Act

The revised Construction Business Act, which came into effect in December 2024, made it mandatory for general contractors to notify project owners of "risk information." Furthermore, project owners now have an obligation to make efforts to engage in discussions regarding price pass-throughs. Legally, the position of subcontractors has been strengthened.

4. The Importance of Specialized Technology

Specialized technology is required for the construction of skyscrapers, and the number of companies capable of handling such projects is limited. In the case of the Nakano Sunplaza, Shimizu Corporation's seismic isolation patent was an indispensable factor. Technical superiority is directly translating into bargaining power.

Other Cases Are Also Emerging One After Another

It is not just Nakano Sunplaza. In January 2025, Meguro Ward canceled its ward resident center redevelopment project. Although a budget of approximately 40 billion yen had been anticipated, the decision was made because implementation within the budget was difficult due to soaring construction costs.

Juntendo University also abandoned its hospital construction project in the Urawa Misono area of Saitama Prefecture. Similar cases are occurring one after another across the country.

Keys to Success

Measures for Developers

1. Early securing of subcontractors: Prioritizing the building of relationships with subcontractors from the design stage

2. Flexible pricing: Budgeting that incorporates the risk of rising prices

3. Preparation of alternatives: Maintaining relationships with multiple companies to avoid dependence on a single firm

Measures for General Contractors

1. Building long-term relationships with subcontractors: Moving from one-off transactions to strategic partnerships

2. Improving technical capabilities: Expanding the scope of construction work that can be handled in-house

3. Securing appropriate profits: Breaking away from loss-making orders

Terminology Explanation: Developer
Refers to real estate development companies. These are companies that acquire land, plan and develop buildings, and sell them. Nomura Real Estate, Mitsui Fudosan, and Sumitomo Realty & Development are prime examples. In the case of the Nakano Sunplaza project, Nomura Real Estate led the plan as the project owner.

Future Outlook

This structural change is not temporary. According to a survey by the Ministry of Land, Infrastructure, Transport and Tourism, construction investment in 2024 is expected to exceed 74 trillion yen, and demand will remain high. On the other hand, the supply of labor is limited, and the situation where subcontractors have the upper hand is expected to continue for the time being.

Companies involved in the construction industry urgently need to shift their mindset from traditional 'hierarchical relationships' to 'equal partnerships.' In particular, for local governments and companies considering large-scale redevelopment, early coordination among stakeholders and realistic budget setting will be the keys to success.

The cancellation of the Nakano Sunplaza project may not be an end, but a symbolic event signaling the beginning of a new construction industry.