You Asked Us – Can Foreigners Buy Shops in Japan?

Japan Investment Shops

Investment Shops Japan

18 Apr, 2018 –

Following our last piece in this series, which detailed statistics and strategies to profiting from shops and other retail properties in Japan, we received the following question from a reader –

Q: How easy or difficult is it for foreigners to enter the retail scene in Tokyo, in terms of buying units at shopping malls or other commercial lots? Is there a glut of retail space in Tokyo? If so, are there any bright spots eg. niche or high-end or themed malls? 

A: While there is nothing that limits non-resident foreigners from buying any property in Japan (aside from very specific, cultural heritage or agricultural properties) – there’s a big difference between commercial units in otherwise residential of mixed purpose apartment blocks (street shops) – as opposed to wholly commercial buildings or shopping centers (malls and department stores). While ground floor shops or offices in a mixed purpose building can be purchased by anyone, similar to a residential property, and then leased out to business owners – the situation is quite different with wholly commercial blocks, which are normally entirely owned by a single, licensed operator. That operator runs the entire complex, and provides utilities and services to its entire renter community.

Investing in Shopping Centers

In the latter case, business operators would be required to apply to the building or centre management if they wish to lease shop or office space – those spaces would normally only be available for renting, and not for purchase individually. The operator, on their part, would be required to provide certain services such as infrastructure, in-house advertising space, floor and building maps references to the business, daily or weekly rubbish disposal, etc. While it is definitely possible for foreign investors to purchase and run an entire commercial space structure, and while there are management companies who will be able to then operate the center on your behalf – this of course adds an entirely new layer of complexity to the investment, which becomes more than a simple real estate and rental management transaction. In effect, you will now be running a fully pledged business operation, which would often require hiring, providing for and training of staff, out-sourcing of advertising, stock management, etc. The closest equivalent is probably purchasing and running a hotel or other guest or short term stay accommodation business, as opposed to “straight out” real estate property investment.

Where to Buy?

As for attractive locations – there are plenty of those, in Tokyo and beyond. While traditionally, spots located within walking distance to the JR Yamanote line (Tokyo’s central “circle” train line, which runs in a loop around its main suburbs) were all considered its prime business locations, these days the profitability map has expanded far beyond it, as new and attractive suburbs are being developed and re-developed regularly. Additionally, areas around Tokyo, such as Chiba, Yokohama and Kawasaki are also highly desirable – as are various areas in Japan’s other big cities, such as Osaka, Nagoya, Sapporo, Kyoto, Fukuoka, to name only a few. In fact, when considering the reduced purchase prices in other cities, percentage yields tend to be higher out of Tokyo, as they are in all Japanese real-estate property investment market sectors.

(Source – Ziv Nakajima-Magen, Nippon Tradings International”, Pic – Investment Shops in Japan / “Ziv Nakajima-Magen“)

 

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