A major landlord raises rents, a landmark hotel near Kansai Airport closes, and OYO curtails operations in Japan. Below is a quick weekly summary of some of the recent goings-on in the Japanese real estate market.
LeoPalace decides to raise rent
Mega-landlord LeoPalace21 is raising the rent on their vacant apartments this month. New tenants can expect to pay an additional 1,000 Yen a month on average. The company had previously reduced rents in order to maintain occupancy rates following a construction defect scandal, but demand has since recovered, especially from May onwards. The rent rise is not expected to put a dent in this demand. LeoPalace manages 570,000 apartments nationwide, of which 60,000 are currently vacant. Occupancy rates at the end of May were at 79%, still below the level of 85% seen before the construction issue came to light.
Kansai Airport landmark hotel closes its doors
It was announced on July 1 that the Star Gate Hotel Kansai Airport would close at the end of September due to a downturn in guests as a result of the coronavirus pandemic. The 358-room hotel occupies 32 of the 56 floors in the Rinku Gate Tower Building. Occupancy rates had dropped to the 10% range from February. With a height of 256 meters, this is the 3rd tallest building in Japan. The original hotel tenant was the ANA Gate Tower Hotel Osaka, operating from 1996 to 2011. In 2019, Oriental Suites Airport Osaka Rinku opened up in converted office floors in the building, and, for a short while, two hotels were operating out of the same tower.
OYO’s shrinking presence
On July 6, Bloomberg reported that OYO Hotels, a startup funded by Softbank, closed offices in Sapporo, Sendai, Nagano, Hiroshima and Omiya last month in an effort to streamline operations in the hard-hit hotel industry. They may also downsize their Tokyo headquarters. In March, the company announced plans to launch an OYO Ryokan brand to specialize in traditional Japanese inns – a niche market segment often overlooked by larger operators. OYO made its splash into Japan in April 2019, with a lofty goal of adding 75,000 rooms under its name by March 2020, according to the Nikkei Asian Review. By September 2019, only 4,000 rooms had been signed up.
Will telework really take off?
An article in the South China Morning Post on July 7 suggests that the work-from-home trend may struggle in the long-term due to the cramped living conditions many residents in Tokyo, Singapore, and Hong Kong face. A standard three-bedroom, family-sized apartment in Tokyo and many other cities in the country, is around 70 sqm (753 sq.ft), while younger single office workers typically live in studio apartments that are under 25 sqm (269 sq.ft). These types of small living spaces are not conducive to working from home. Unless incomes rise, it’s not necessarily easy for many workers to upgrade to a larger apartment with a dedicated home office, and few homes have been designed with this in mind.
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