This article was originally published in Housing Japan Magazine, Spring 2020 edition.
PROPERTY UPDATE
by Joe Rigby
CEO, Housing Japan
The Covid-19 pandemic has impacted property markets around the globe. Tokyo is no exception.
On April 7, a state of emergency was declared in Tokyo and six other prefectures, resulting in the implementation of a “soft lock-down.” The public was asked to stay home as much as possible and reduce interaction with other people by 80%. The declaration was extended nationwide in mid-April and lifted in late May. Although the restrictions were not legally binding, as in many other countries, the public has generally cooperated. The impact has been a significant reduction in economic activity.
At Housing Japan, we were working from home where possible when the declaration was made, so were able to quickly adjust our business to the new work style. We continue to operate business as usual, helping clients across our leasing, sales, investment and property management businesses.
As you would expect, we have seen a drop-off in our short-term leasing business as many inbound clients have changed their plans or put them on hold. However, we are seeing new demand for leasing our furnished apartments from local clients who seek “private offices” due to difficulty working from home. Our residential leasing, which was very busy with Olympic-related business prior to the outbreak, continues to be engaged in local moves. In residential sales, we have seen less interest from offshore investors who are no longer able to travel to Japan. Still, the business continues to execute transactions and the market remains active; we received a number of new purchase applications from both Japanese and offshore investors in April. So far, we have not noticed any significant increase in clients’ interest to sell.
Housing Japan’s self-storage business, Trunk Room Tokyo, continues to perform strongly. The self-storage sector user base is mostly Japanese, and demand may even be rising due to greater periods spent at home. We continue to like the self-storage sector for its high yield and stable cash flow.
Of the other sectors, we expect that office, hospitality and retail are likely to take the biggest hit from the crisis. From our own experience at Housing Japan we see that, even post-pandemic, many people are likely to continue to work from home. It is possible that long-term demand for office space, particularly large floor plates, could drop considerably. On the other hand, people might rethink their home environments, causing a structural increase in demand for residential property.
Nationwide, the hospitality sector is under pressure. The collapse in demand from inbound tourism is causing many operators and properties extreme financial distress. We expect there will be opportunities for cashed-up investors to acquire good assets at discounted prices. Our investment team has already sourced a number of interesting opportunities that should deliver excellent returns as the crisis recedes and hotel demand returns. To a lesser extent, the same is true of the commercial real estate sector, and opportunistic investors should be looking for distressed opportunities now.
Housing Japan remains committed to serving our clients with all their real estate needs. The pandemic is a terrible crisis that has resulted in much suffering and turmoil. It will resolve over time though, and new business opportunities will emerge. We look forward to supporting our clients proactively through this period of rapid change.
Joe Rigby is CEO of Housing Japan
