1. Real estate situation in Fukuoka City after COVID-19
The COVID-19 pandemic has also seen a decline in the economy and a decline in the attraction of large cities. What is the current state of Fukuoka's real estate market after the COVID-19 pandemic?
Real estate appraiser Satoshi Sasaki
According to the Population, Demographics and Household Survey based on the Basic Resident Register published by the Ministry of Internal Affairs and Communications, Fukuoka City will have the highest population growth rate (including foreigners) among all cities and wards nationwide from January 2021 to December 2023. In addition, a comparison of the four major regional metropolitan areas shows that Fukuoka City and the Kyushu region have a high flow of people.
Figure 1-1_Population growth ranking of all cities in Japan
Figure: 1-2_Population by regional block
"The concentration of population from all over Kyushu in Fukuoka City is reflected in real estate prices in the condominium and office markets. In fact, among designated cities , Fukuoka City's average rate of increase in commercial land prices has been the highest in the nation for four consecutive years ," says Sasaki.
Kumamoto and Hokkaido are also making headlines as they show great movement in attracting semiconductor companies, but investment money continues to be concentrated in Fukuoka City 's commercial districts, as represented by Tenjin Bang and Hakata Connected.
2. Attention on the rapid recovery of the hotel market and future initiatives for inbound tourism
The number of foreign visitors to Japan in 2023 was approximately 20.57 million, recovering to about 80 % of the pre-COVID-19 figure of approximately 31.88 million in 2019. Occupancy rates and average room prices of hotels and inns in Fukuoka City have also increased, and 2024 has seen a rapid recovery that exceeds pre-COVID levels.
In addition, the amount of consumption by foreign visitors to Japan rose from 4.8 trillion yen in 2019, before the coronavirus pandemic, to 5.3 trillion yen in 2023 , the highest ever.
Figure 2: Inbound tourism and the hotel market are recovering rapidly
Real estate appraiser Satoshi Sasaki
Although there are many inbound tourists in the city, Fukuoka City is outside the so-called "golden route," so the challenge seems to be how to attract Westerners, who have high consumption prices, to the Fukuoka City.
The hotel market is booming due to the recovery of inbound tourism and domestic Business and leisure demand. Hotel leases often include variable rent linked to sales, which allows for the expectation of high profits.
3. Fukuoka City's condominium market is expected to see further price hikes
"Prices of condominiums for sale in Fukuoka City have exceeded last year's levels, and in particular in Chuo-ku the price per tsubo (square meter) of exclusive floor area has exceeded 3 million yen," says Sasaki.
In particular, there are plans for the development of multiple condominiums around Fukuoka Castle, with prices set to far exceed Fukuoka's current standards. These are expected to push up condo prices in the city even further. The price hike has also spread to the outskirts of Fukuoka City, with new condominiums around Nishitetsu Shirakihara Station already sold out at over 2.5 million yen per tsubo. High-priced condominiums with strong brands in particular sell out quickly, which is also a factor in pushing up land prices.
In recent years, construction and labor costs have been rising year by year due to the weak yen and the global situation . This trend is unlikely to change anytime soon.
4. Massive supply of office buildings to begin at the end of the year
In the center of Fukuoka City, redevelopment projects known as Tenjin Bang and Hakata Connected are taking place, and huge cranes operating can be seen prominently.
Tenjin Business Center and Fukuoka Daimyo Garden City have already been completed, and small and medium-sized newly constructed office buildings are being supplied to the outskirts of the city center.
According to local experts, the current vacancy rate is said to be around 5 %, indicating that there is a good balance between supply and demand.
The area appears to be holding up for now, thanks to the entry of new entities such as major consulting firms and foreign financial institutions, but there are concerns that the vacancy rate will worsen in the future as the Tenjin Big Bang progresses .
Figure 4: Fukuoka City's office market
Real estate appraiser Satoshi Sasaki
The Tenjin Big Bang will see a massive supply of office buildings starting at the end of this year. As the supply will far exceed the office demand in the city, a deterioration in the office market is inevitable.
However, a distinctive feature of this mass supply of office buildings is that they are dominated by properties on Meiji-dori Avenue in the Tenjin district, meaning that many of the properties are A- ranked in terms of both location and building specifications, which is different from past mass supply of offices.
Newly constructed office buildings have the aspect that supply creates demand, which is a positive factor for the city's overall economy, so I think it is best to view this large amount of supply from a medium to long-term perspective.
5. Fukuoka's Real Estate Securitization Market Continues to Expand
Real estate securitization is a system for collecting funds from investors and distributing rental income.
Fukuoka is home to the local REIT, the Fukuoka REIT Investment Corporation, which includes properties such as Canal City Hakata, which is familiar to the general public.
What benefits does real estate securitization bring to local communities?
Figure 5: Expanding Fukuoka's real estate securitization market
Real estate appraiser Satoshi Sasaki
In Fukuoka City, private REITs have been established by local companies, and new ones are expected to be established in the future, which we believe will lead to the revitalization of urban development in Fukuoka.
6. The impact of rising construction costs is widespread
When considering real estate investment, the biggest factor currently affecting you is the soaring cost of construction work .
The reasons for this include increased construction demand due to the Tokyo Olympics and redevelopment, rising construction material costs due to the sharp depreciation of the yen, and increased labor costs.
The first impact is the soaring prices of apartments. As land prices and construction costs rise, the prices of apartments naturally rise. Fukuoka City, especially Chuo-ku, has strong brand power, so high-priced apartments are still selling well, but it is unclear how long this will continue.
Newly built rental apartments are also expensive because the cost of construction work is added to the rent. Newly built apartments are easy to fill because they have a premium feel, but it tends to be difficult to get a second lease on them.
Other impacts include the cancellation of reconstruction and redevelopment projects, which may affect the upcoming Tenjin Big Bang project.
Real estate appraiser Satoshi Sasaki
The rise in construction costs will affect not only new construction but also repair work. Therefore, people who already own condominiums will also be affected through the rise in repair reserve funds.
7. The area to watch in the future is the former Kyushu University site in Higashi Ward, Fukuoka City
The development of the Kyushu University site was won by a corporate group led by Sumitomo Corporation, including JR Kyushu, Saibu Gas, Daiwa House, Tokyu Real Estate, The Nishinippon Shimbun, and Nishitetsu, for 37.1 billion yen.
As a smart city, 2,000 condominiums and rental apartments are planned to be built in the future, with the first facility expected to be completed around 2030 .
Real estate appraiser Satoshi Sasaki
The development of the Kyushu University site will have a major impact on Higashi Ward. JR Kyushu is planning a new station in Kaizuka, aiming to open in 2027 .
However, assuming that facilities will be built from around 2030, it will take some time for the area to mature as a residential area. On the other hand, it can be said that real estate prices in Higashi Ward currently seem cheap, given its good proximity to the city center .
8. Fukuoka City is also an attractive real estate investment destination
Having overcome the chill caused by the COVID-19 pandemic, Fukuoka City is beginning to show signs of future development. Not only is it a gateway to Asia, but it is also expected to grow further as a Tourism and commercial city.
Fukuoka City, which is often cited as a city people want to live in, will likely continue to attract attention as an investment destination.
