Quick real estate news summary for the week

Mass layoffs at a major landlord, hotel deals off the table, the biggest drop in business outlook, but good news for warehouse owners. Below is a quick weekly summary of some of the recent goings-on in the Japanese real estate market.

GDP contraction not as bad as original estimate

Japan’s GDP contracted at an annualized pace of 2.2% in the first quarter of 2020, a slight improvement over the initial estimate of 3.4%. A larger contraction is expected in the April – June quarter due to temporary business shutdowns.

Two hotel deals off the table due to pandemic

A listed real estate investment and property management firm in Tokyo has canceled the purchase of a hotel project in central Osaka, and lost the sale of several hospitality assets in Wakayama after the buyer backed out of the deal. The Osaka settlement was scheduled to take place in May, but with no tourists in sight for the near future, the hotel would not be able to provide the required return on investment. The Wakayama assets are located on Marina City Island, and across the street from one of the proposed locations for an integrated casino resort. The buyer failed to obtain the necessary funding to go through with the purchase.

Warehouse vacancy rate falls to historic low

According to Ichigo Real Estate Service, the vacancy rate for warehouse/distribution space in Tokyo was 0.9% in the first quarter of 2020, down 1 point from the previous quarter and the lowest seen since they began recording data in 2008. In the Kansai region the vacancy rate was 2.0%.

LeoPalace looks to lay-off 1,000 staff

On June 4, NHK reported that Mega-landlord LeoPalace21 Corporation is seeking voluntary resignation from as many as 1,000 staff, or 18% of their workforce, as a widespread apartment construction scandal has worsened occupancy rates and swelled expenses. 

Business condition index sees biggest drop on record

Japan’s coincident index (CI) reported by the Cabinet Office on June 5 showed the biggest month-on-month drop since data-keeping began in 1985. The CI dropped 7.3 points to 81.5 in April (2015 average = 100). Consumer spending and business activity essentially halted in April after the government declared a nationwide state of emergency in an attempt to slow the spread of the coronavirus. The previous record drop was see in January 2009 during the global financial crisis, with a 6.4 point drop to 75.5. 

Open for business

Retailers have started to re-open this month, albeit with some measures introduced to limit crowds. Apple reopened their stores nationwide on June 3 after being closed since the end of March. Open hours have been shortened while shoppers must answer a questionnaire and have their temperature taken before a limited number of people are allowed in the store. On June 5 Uniqlo returned to Harajuku after an 8-year hiatus, opening a 2,000 sqm store in the recently completed WITH HARAJUKU retail and residential complex in front of Harajuku Station. Ikea opened a 2,500 store in the same complex on June 8. The Shibuya 109 fashion mall reopened on June 1 after being closed for almost two months.

New train station opens in Toranomon

Toranomon Hills Station on the Hibiya Subway Line opened on June 6. This is the newest station added to an existing subway line by Tokyo Metro since the opening of Tameike-Sanno Station in 1997. It is an integral part of Mori Building’s massive ongoing redevelopment of the Toranomon district.

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