Nagoya’s central district is seeing more empty stores and offices as the COVID-19 pandemic has led to an increase in teleworking and almost no inbound tourists.
Tsuruha Co., a major Sapporo-based drugstore operator, had a flagship store for tourists from overseas in Nagoya’s Sakae area, the largest business district in the Chubu region.
After entry bans were introduced for inbound tourists following the pandemic, the company closed the outlet in mid-May along with 15 other stores in cities including Osaka, Kyoto and Kobe.
The store in Sakae has remained vacant since then.
Why is the ground floor of a building in a prime downtown location remaining empty for more than six months?
“The tenant (Tsuruha) closed the store with a yearly contract left, and keeps paying the high rent set before the pandemic,” says an official from the local real estate industry. “The firm must have judged that if it can’t expect inbound-related sales, it will suffer less damage (closing the outlet) rather than keeping the store open and having staff there.”
“We decided to close shops taking into account the situation of each store, including rent and staffing,” a spokesperson for Tsuruha’s parent company Tsuruha Holdings Inc. said.
“It is difficult to judge at this moment whether we will reopen a store in the same district after the pandemic settles down and inbound tourists return,” they said.
Newly opened shopping complexes are also suffering. Rayard Hisaya-odori Park, a shopping and dining complex that opened in September in a redeveloped park in Sakae, and Bino Sakae, a commercial complex that opened in November in central Sakae, both had to start out with some vacancies.
“Since tenants have to invest tens of millions of yen for interior work to open a store in a complex, it is not worth doing it unless they can make a solid profit,” said Noriyuki Kawamoto, director of Tokyo-based commercial real estate services firm CBRE K.K.’s Nagoya office.
“Since it is difficult to make sales forecasts amid the COVID-19 pandemic, few companies are willing to become tenants and pay a large amount of rent,” he said.
The difficulty to predict the demand for shop spaces pours cold water also on large-scale urban redevelopment projects.
Nagoya Railroad Co. announced in November the intention to postpone a project jointly planned with three other firms, including Osaka-based Kintetsu Group Holdings Co., to construct a gigantic building south of Nagoya Station which had been scheduled to start in fiscal 2022.
The spread of COVID-19 infections is also hitting office buildings where people of Nagoya and other cities commute to.
According to office brokerage Miki Shoji Co., the average office vacancy rate in Nagoya’s business districts in January last year before the outbreak was 1.91%, the lowest since the burst of the asset price bubble, but rose to 3.67% in the end of November.
Although the figure is lower than the 4.33% rate in Tokyo, it is gradually approaching 5%, which is regarded as an indication that the economy is entering a recession.
An increase in office vacancy is attributable to the fact that many companies in Nagoya are reducing their office space as more of their employees are working from home.
Furthermore, there are more cases of companies based in Tokyo and Osaka vacating small branch offices of less than 100 square meters in Nagoya.
An official of a medium-size manufacturer which decided to close its Nagoya office said, “Since we can’t conduct walk-in sales or face-to-face selling, we decided it would be the same if we worked remotely from Osaka.”
While demand for office spaces, such as for online shopping service operators’ call centers, is increasing in cities outside Tokyo and Osaka, such operators say cities like Fukuoka and Sendai are at an advantage compared with Nagoya as personnel costs are lower.
The housing and apartment industry is also working to adapt to changes amid the pandemic.
Avantia, a Nagoya-based housing manufacturer, began selling in the end of November in Nagoya’s Chikusa Ward a built-for-sale house with work space for teleworkers.
Ken Nakamura, manager of the firm’s Nagoya Higashi branch, said, “The area is popular among workers of trading firms and major firms in the Toyota group who commute to central Nagoya. Customers asking for a teleworking space undoubtedly increased.”
The firm designed the new housing with a teleworking space located adjacent to a living room, dining room and a kitchen without doors in between but partly marked off by a wall so that family members who are working and those who are not can spend a long time at home together without feeling disturbed.
Osaka-based Kintetsu Real Estate Co. says its new 21-story apartment complex currently on sale in Sakae has a telework lounge with individual booths, which the firm says is a first for a condominium in the Tokai region.
The three soundproof booths can be used 24 hours a day with reservation. One comes with a web camera and a monitor screen which can be used for online meetings.
“Being able to secure the most appropriate teleworking space within the grounds will become the new standard for an apartment life,” said a Kintetsu Real Estate official, adding that the firm is willing to build similar lounges in its apartment buildings to be put on sale in the future.
This section features topics and issues from the Chubu region covered by the Chunichi Shimbun. The original articles were published Dec. 21.
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