Average commercial land prices in Tokyo have reached their highest level in 33 years, since the bubble era of 1993. The recovery in demand for offices and hotels, along with an influx of domestic and foreign investment, has contributed to a nationwide average land price increase for five consecutive years. Although Tokyo's commercial land prices have not yet surpassed the 4.18 million yen (approximately $36,800) per square meter recorded in 1993, they are approaching that level after a prolonged decline following the bubble's collapse. However, rising construction costs have dampened housing purchases and redevelopment in regional cities, leading to a noticeable disparity in price trends.
According to the Asahi Shimbun, the Japanese Ministry of Land, Infrastructure, Transport and Tourism announced on September 15 that the average land price, including residential and commercial areas, rose by 1.5% nationwide compared to last year. The increase this year matches last year's rate, with commercial land prices up 2.9% and residential land prices up 1.0%. Regionally, the average for combined residential and commercial land prices rose by 5.4% in the Tokyo area and 3.6% in the Osaka area, both showing larger increases than last year.
The benchmark land price is an official indicator released by the government, based on Japan's 'public land price' as of January 1. Local governments conduct surveys based on data from July 1 each year, which the Ministry of Land, Infrastructure, Transport and Tourism compiles and announces. The prices are assessed based on vacant land and serve as a reference for land transactions.
According to the Nihon Keizai Shimbun (Nikkei), the average commercial land price in Tokyo increased by 11.4% from last year, marking the second consecutive year of double-digit growth. The average price per square meter has surpassed 3 million yen (approximately $26,400), reaching its highest level in 33 years since 1993. The Nikkei attributes this rise to increased office attendance post-COVID-19, a surge in inbound tourism boosting demand for hotels and retail spaces, and the influx of domestic and foreign investment.
Tokyo's strength is also evident in residential land prices, which rose by 5.8%, making it the highest increase among Japan's regional governments in 12 years. The Nikkei reports that demand for apartments remains strong, particularly among the affluent. The average price of newly built apartments in Tokyo's 23 wards exceeded 140 million yen (approximately $1.23 million) in the first half of this year.
However, signs of cooling have emerged in the existing apartment sales market in Tokyo, contrasting with the new apartment market. The Tokyo Kantei real estate research firm reported that the average asking price for existing apartments in Tokyo's 23 wards fell by 0.1% in July compared to the previous month, marking a decline for two consecutive months. The firm noted that excessively high prices in recent years are undergoing adjustments, and many potential buyers are exiting the market due to rising mortgage rates.
The steepest land price increases were observed in ski resort areas. According to the Asahi, commercial land in Hakuba Village, Nagano Prefecture, surged by 35.6%, ranking first in the nation for commercial land price increases. Residential land in Furano City, Hokkaido, also rose by 32.0%, claiming the top spot for residential land price increases. Seven of the top ten commercial land price increases and six of the top ten residential land price increases are attributed to demand from inbound tourists. The Asahi explains that the weaker yen has enhanced the purchasing power of tourists, increasing the profitability of tourist areas and attracting investment.
In Osaka, the tourist hub of Minami has reclaimed its position as the most expensive area, surpassing the business district of Kita for the first time in seven years. According to the Asahi, the site of the famous Glico sign along the Dotonbori River, the 'Dekai Ebisu Bashi Building,' saw its price rise by 7.1% to 25.8 million yen (approximately $227,400) per square meter, making it the most expensive commercial land in the Osaka area since before the COVID-19 pandemic in 2019. Until last year, the area around JR Osaka Station in Kita held the top spot.
In contrast, major cities in regional areas have experienced a slowdown in price increases. The Asahi reports that the average land price increase in Sapporo, Sendai, Hiroshima, and Fukuoka dropped from 5.3% last year to 4.1% this year.
The Nikkei notes that in regional areas, the rental income from new apartments or commercial facilities is not rising as much as in the three major urban areas of Tokyo, Osaka, and Nagoya, making it difficult for developers to recoup the sharply increased construction costs. The burden of construction costs has led to more people postponing home purchases, and there have been numerous cases of redevelopment projects being halted or delayed. JR Kyushu has suspended its plan to construct a complex building at Hakata Station, which was aimed for completion by the end of 2028, due to construction costs nearly doubling.
* This article has been translated by AI.
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