TOKYO -- Commercial land prices in Japan logged a second straight year of gains, with foreign tourism boosting the value of properties in such hot spots as Kyoto and urban redevelopment feeding steady demand for office space.
The average price of commercial real estate nationwide climbed 0.5% in the year through July 1, an annual government report released Tuesday shows -- markedly better than the previous year's 0.005% increase.
The average value of all lots examined in the big three metropolitan areas of Tokyo, Osaka and Nagoya rose 1.2%, 0.2 percentage point faster than a year earlier, with larger gains seen in all three. Though prices for the rest of the country slumped 0.9%, the decline slowed by 0.3 point from the previous year, thanks to strong showings in the regional hub cities of Sapporo, Sendai, Hiroshima and Fukuoka.
Residential real estate prices for Japan as a whole fell 0.6%. The average price of all plots nationwide dipped 0.3%, continuing a 26-year losing streak but also marking an eighth straight year of slowing declines.
Land values have improved on the back of a slow but steady economic recovery. The Ministry of Land, Infrastructure, Transport and Tourism considers the market healthy, citing growth based on real demand.
The trend owes partly to developers scrambling to capitalize on a rising tide of foreign tourism. A record 2.68 million visitors traveled to Japan from abroad in July, while tourist spending exceeded 1 trillion yen ($9 billion) in the April-June quarter.
The value of the land occupied by the Toyoda Aisando incense shop in Kyoto's Gion district, for example, surged 27.3% from a year earlier. Developer Mitsui Fudosan recently opened the first location of a new luxury hotel brand nearby.
Redevelopment has boosted real estate values as well. The priciest plot listed in the survey is occupied by the Meijiya Ginza building in Tokyo's posh Ginza district. At 38.9 million yen per sq. meter, the property's value topped its level in 1991, toward the end of Japan's economic bubble.
Brisk office demand in the Ginza area has led to new commercial facilities cropping up amid a wave of redevelopment with an eye toward the 2020 Tokyo Olympics. U.S. fund GreenOak Real Estate invested in office space in the mixed-use Ginza Six complex that opened this year, buying the eighth floor in June for more than 20 billion yen. Commercial land prices are up 3.3% in the Tokyo metropolitan area, 4.5% in Osaka and 2.6% in Nagoya.
The Bank of Japan's massive monetary easing program has also buoyed land values. Commercial land prices rose in 17 of Japan's 47 prefectures, more than a year earlier, as money from domestic and foreign investors flowed even to outlying areas. Average commercial real estate values outside the big three urban areas dipped just 0.6%, a 0.5-point improvement from the previous year.
Residential land values, by contrast, continue to flag. Nearly 60% of the 14,656 residential properties surveyed declined in value on the year. Growth in the big three metropolitan areas came in flat at 0.4%, while average values sank 1% for the rest of Japan. Prices sank in 38 prefectures, with Shizuoka, Shiga, Hyogo and Nara prefectures seeing sharper drops than in the previous year. As populations shrink in many areas, the growing number of vacant homes and properties has become a pressing issue.
An index of nationwide residential real estate prices, using 2008 as the 100-point baseline, fell to 82.9, while a similar index for commercial land slid to 80.8. Average values for both types of lots declined over this nine-year period in every prefecture but Okinawa.