Let’s do a bit of a dive into a multi-family property listed for sale in central Tokyo recently.
Background
This is a newer build, contemporary block of apartments designed for professional singles and DINKS. The building has fewer apartments, but larger apartments. It’s within walking distance to several stations serviced by four different train lines. Door-to-door, someone could be at Tokyo Station within 25 minutes and Shinjuku Station within 16 minutes. Neighborhood-wise, there are 10 supermarkets within a 700-meter radius, including some high-end and budget options.
The building was fully leased up within four months of completion.
In terms of yield, it is on par with market trends.
Local rental market
The apartments in the target building are renting for approximately 16,100 Yen per tsubo (4,800 Yen/m2). We have identified three comparable buildings nearby, with average rents ranging from 16,100 to 17,900 Yen per tsubo.
Based on data collected from 75 apartment buildings containing 2,890 units within a 500-meter radius of the target property, we have identified the following:
- The average rental vacancy rate is 2.4%
- The average advertised rent is 15,300 Yen per tsubo (4,600 Yen/m2)
- A third of the total units are in buildings built within the last 10 years
- A fifth of the units were in buildings that are over 40 years old
- Average building age: 21.8 years
- Average units per building: 38
Rents obviously decline as buildings become older and outdated compared to their newer counterparts. In this sample set, apartments in buildings less than 10 years old had an average rent that was 41% higher than those in buildings between 40 to 50 years old. In other words, the 40+ year old apartments were around 30% cheaper. Even the apartments that were 10 to 20 years old were 10% cheaper than newer ones.
Land values
The latest government assessed land values (koji-chika) announced on March 26 showed an average increase of 5.4% for residential land values across Tokyo’s 23 wards in 2024. No survey sites in Tokyo, commercial or residential, saw a decrease.
For survey sites in the vicinity of this target property, annual increases in 2024 ranged from 6.4 ~ 10.6%. Two selected nearby residential survey sites have seen land values increase by between 43 ~ 63% over the past ten years.
