Kajima's real estate development strategy has twin goals: to diversify the Company's earnings sources and to leverage synergies with its construction business.

Unlike many other companies, Kajima did not temporarily withdraw from the development business after the collapse of Japan's speculative "bubble" economy. Despite the difficult market, the Company maintained its presence and its relationships, and as a result, now holds a very favorable position. Kajima also has a strong advantage over companies specialized only in real estate development, because its project planning teams have full access to the latest construction technologies. For instance, condominiums built for sale by Kajima feature advanced earthquake safety technologies, as well as designs that make it easy for buyers to select their own floor plans. Kajima technologies are not only at the forefront of the construction industry; they also enjoy an excellent reputation in the real estate market.

No other company can match the broad range of capabilities and track record that Kajima brings to new, large-scale development projects. The Company is well known for its office complexes, commercial facilities and housing developments in central Tokyo locations such as Akihabara, Shinagawa, Yaesu and other commuter hubs. Kajima's access to sales leads, expertise in urban infrastructure, and knowledge of building management gives the Company a clear advantage in large projects like these.

Kajima provides a wide variety of real estate products: offices, housing developments, government and commercial buildings, resorts, medical and welfare centers, production and distribution facilities, IT-related installations, and more. In all these different fields, Kajima takes special care to ensure that its developments complement their surroundings. The benefits to society are many: more attractive urban environments, new added-value building features, and increased property values.

Market Conditions and Business Performance
Although land values in Japan declined for the 13th consecutive year in 2004, the rate of decline in major cities was lower than at any time in the last six years. In select locations in Tokyo, Nagoya, Sapporo and Fukuoka, values actually rose. In smaller cities, however, the decline was even faster than in 2003. Demand and competition for condominiums and office space in Tokyo's central business districts is increasing, but both demand and supply in smaller regional cities remain low.

Despite the challenging environment, Kajima's development projects turned in a strong performance in the term under review, due to the full occupancy of large office buildings, the sale of the Kajima Shiodome Tower, and brisk condominium sales. On a non-consolidated basis, new contract awards reached 85.5 billion, revenue was 74.0 billion, and gross profit was 8.7 billionall of which exceeded targets by more than 5%.

Future Outlook and Priorities
With development projects performing well, Kajima's goal is to improve its position now to lock in even better performance in the future. The Company is taking steps to streamline the balance sheet and promptly recover invested capital through securitization of real estate assets. One example is Kajima's recent successful bid for Japan's first project involving a real estate securitization scheme for national land. In the current financial year, Kajima will establish a fund for certain of its property holdings in order to accelerate the recovery of invested funds, while still securing stable cash flows thereafter. With an increasingly sound financial position for its real estate business, the Company is prepared for a future of steady growth and increasing profits.

Three Major Development Projects Launched in the Term under Review

Three Major Development Projects Completed in the Term under Review