Office vacancy rate hits near-6 year high, Hotel Vista operator files for bankruptcy protection, Kyoto firms up plans on costly holiday home tax, and Fauchon opens first hotel in Japan. Below is a quick weekly summary of some of the recent goings-on in the Japanese real estate market.
Office vacancy rate hits highest level since 2015
The office vacancy in Tokyo’s five central business districts exceeded 5% for the first time since June 2015, reaching 5.24% in February. This is a 0.42 point increase from January and a 3.75 point increase from February 2020. The 5% line is said to indicate the shift towards a renters market and indicates a trend for office rents to decline. Minato Ward had the highest vacancy rate at 6.88%, up from just 1.74% in February 2020. Shibuya Ward had a vacancy rate of 5.55%, up from 1.87% last February. The average office rent in Shibuya is down 7.2% from February 2020. Vacancies are expected to increase as company leases come up for renewal.
Hotel Vista operator files for bankruptcy protection
Hotel operator Vista Hotel Management filed for bankruptcy protection under the Civil Rehabilitation Law on March 11, with debts of approximately 3.7 billion Yen. The company, affiliated with Singapore’s Uni-Asia Group Limited, operates the Hotel Vista brand in Japan, primarily targeting business travelers. Revenues in 2019 reached 7.1 billion Yen. Although foreign tourists represented a small share of guests, five new hotels were opened from the end of 2019 through 2020 to target foreign travelers in the lead-up to the Summer Olympics. An ongoing ban on the entry of foreign tourists and the postponement of the games saw revenues plummet and financing dry up. The 18 hotels are expected to continue to remain open.
Kyoto’s holiday home tax could see non-resident property owners hit with annual taxes of 60,000 ~ 430,000 Yen
Kyoto City is getting closer to implementing an annual tax on out-of-town homeowners that could bring in as much as 2 billion Yen in tax revenue each year. Although details have yet to be decided upon, the general outline is that it would apply to homeowners who don’t use the property as their primary residence. Exceptions might be applied to homes that are currently empty because they are listed for rent or sale or used for commercial purposes. The city’s traditional ‘machiya’ townhouses might also be excluded from the tax burden. Depending on which method of valuation is chosen, a 100 sqm apartment in Nakagyo Ward could have a tax bill of anywhere from 65,000 ~ 430,000 Yen (US$600 ~ 4,000) a year, while a 300 sqm home in Arashiyama might have a tax bill of 120,000 ~ 430,000 Yen (US$1,100 ~ 4,000) a year. Kyoto wouldn’t be the first city to introduce a tax on unoccupied homes. Atami City in Shizuoka has had this system in place since 1976.
Fauchon opens hotel in Kyoto
Fauchon Hospitality, the hotel branch of the luxury French food brand, has opened their hotel in Kyoto on March 16. This is their first hotel in Japan and second outside of Paris. The 59-room hotel is located a short walk from Kamogawa River and Kiyomizu-Gojo Station. The 10-story building was previously Hotel Sunroute Kyoto. It was acquired by a Tokyo-based real estate company in 2017. While some hotels are riding out the pandemic, others are less successful. A Mie Prefecture-based company acquired a 60-room hotel in Nakagyo-ku from the bankrupt WBF Hotels & Resorts and plans to re-open it this April. Meanwhile, the 150-room Oriental Hotel Kyoto Gallery that opened in Kiyomizu-Gojo in September 2019, closed permanently in October 2020 (it is reopening under a new operator in July 2021). Nightly room rates range from 74,000 ~ 110,120 Yen for two guests, including breakfast. Fauchon has had a presence in Japan since the 1970s, operating shops, cafes and bakeries.
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