Are the Regional Hub Cities of Sapporo, Sendai, Hiroshima, and Fukuoka Attractive Investment Destinations for Real Estate?
The major metropolitan areas of Japan include the Greater Tokyo Area (encompassing Tokyo, Saitama, Chiba, and Kanagawa), the Kinki region centered around Osaka (including Kyoto and Hyogo), and the Chukyo region centered around Nagoya in Aichi Prefecture (including Gifu and Mie). These three regions are home to about half of Japan's total population.
Outside these three major urban areas, there are key regional cities that drive development, economic revitalization, and enhancement of urban services. These cities include Sapporo in Hokkaido, Sendai in Miyagi Prefecture, Hiroshima in Hiroshima Prefecture, and Fukuoka in Fukuoka Prefecture.
These four cities are among the most populous in their respective regions and serve as hubs for major corporate branches, government agencies, universities, and research institutions. Additionally, they play a crucial role in international exchanges, with various initiatives aimed at connecting Japan more globally.
According to the official land prices published by the Ministry of Land, Infrastructure, Transport and Tourism in March 2022, the average price for all types of land in Tokyo, Osaka, and Nagoya rose by 0.7% compared to the previous year. In contrast, the land prices in the "four major regional cities" of Sapporo, Sendai, Hiroshima, and Fukuoka showed an average increase of 5.8%, significantly outperforming the major urban regions.
This trend in official land prices highlights the appeal of these regional cities as new investment destinations for real estate businesses. Traditionally, investments have focused on the populous major urban regions due to their large scale. However, due to high property prices in these areas, substantial investment funds are required. Thus, when considering cities for safe investment with lower capital outlay, the regional cities of Sapporo, Sendai, Hiroshima, and Fukuoka become strong candidates.
These cities attract a young population from across their broader regions for education and employment, providing a stable demand for rental apartments, commercial buildings, and accommodation facilities.
Real Estate Investment Opportunities in Sapporo, Sendai, Hiroshima, and Fukuoka
The real estate markets in Japan's major regional cities such as Sapporo, Sendai, Hiroshima, and Fukuoka are attracting global attention due to ongoing redevelopment projects and rising land prices. Here, we will discuss the characteristics and attractions of these four major cities.
1. Sapporo, Hokkaido
Land prices in Sapporo have shown significant increases, with residential areas increasing by 9.3% and commercial areas by 5.8% in 2022. Development plans continue to progress, including the extension of the Hokkaido Shinkansen expected by 2031 and potential Winter Olympics bids for 2030, both likely to further increase land values.
Additionally, JR Hokkaido and NTT Urban Development have announced plans for Sapporo's first high-end hotel with a foreign brand, in partnership with Marriott International, scheduled to open in fall 2029.
Surrounding areas like Kitahiroshima City, Eniwa City, Ishikari City, and Ebetsu City are also experiencing rising land values, with Kitahiroshima City notably achieving the highest increase in Japan for both residential and commercial land prices in 2023, due to the completion of the "Hokkaido Ballpark F Village."
2. Sendai, Miyagi Prefecture
Sendai, the only government-designated city in the Tohoku region, is known as "The City of Trees" for its beautiful blend of economic functions and natural settings. In 2022, the official land prices for residential areas rose by 4.4% and for commercial areas by 4.2%, with high growth rates around the station and within walking distance from the railway stations indicating strong demand for apartments.
The city is currently undergoing the "Sendai City Center Reconstruction Project" aimed at replacing old buildings and promoting corporate locations. Areas around Sendai Station, Koukaido Park, and Ichibancho are also targeted for redevelopment.
The former Sakurano Department Store site near JR Sendai Station's west exit is slated for development into a 150m-tall office building and a 130m-tall hotel, aiming for completion by 2027. Plans are also underway for the "Aoba-dori Avenue Plaza" and a new Sendai City Hall, further expected to enhance urban functions.
3. Hiroshima, Hiroshima Prefecture
As the largest city in the Chugoku region, Hiroshima's official land prices are on an upward trend in 2022, with residential areas rising by 1.4% and commercial areas by 2.6% from the previous year.
The "JR Hiroshima New Station Building," a 20-story structure including shopping centers and hotels, is scheduled to open in spring 2025. With plans for streetcars to enter the facility, it is expected to become a highly convenient large-scale commercial complex.
In the commercial hub areas of Hatchobori and Kamiyacho, three buildings with 15, 16, and 28 stories are expected to be completed by 2028. The Kamiyacho area, centered around the "Sun Mall" commercial building, is planning to construct buildings up to 50 stories high.
Additionally, the Central Park Square in the Naka Ward will become the new home base for the Sanfrecce Hiroshima football team, with the "HIROSHIMA Stadium Park" capable of accommodating about 30,000 people, scheduled to open in August 2024.
In October 2022, the luxury foreign brand hotel "Hilton Hiroshima" opened its doors. With popular tourist attractions like the Itsukushima Shrine and the Hiroshima Peace Memorial (Genbaku Dome) drawing foreign visitors, investing in real estate that captures inbound demand could yield significant returns.
4. Fukuoka, Fukuoka Prefecture
Fukuoka's 2022 official land prices for residential and commercial areas increased by 6.1% and 9.4%, respectively, marking the second consecutive year it led the national rate of increase for commercial land.
To address the chronic shortage of office buildings, the "Tenjin Big Bang" redevelopment project was initiated in 2015. Designated as a "National Strategic Special Zone," relaxed regulations on floor-area ratios and height restrictions have enabled the construction of high-rise buildings. Over the next ten years, the replacement of 30 buildings is planned, expected to generate an annual economic effect of 850 billion yen.
In March 2023, the luxury hotel "The Ritz-Carlton" opened its doors. Additionally, the "Hakata Connected" project, which guides the development of advanced buildings and traffic arrangements around Hakata Station, is also progressing. As a popular gateway to Asia, real estate prices in Fukuoka are likely to continue rising.
Sapporo, Sendai, Hiroshima, Fukuoka: A Comparison of Data
Evaluating future potential through various data is crucial in real estate investment. Here, we present not only the land price increase data for Sapporo, Sendai, Hiroshima, and Fukuoka but also numbers concerning population, number of businesses, and city production.
1. Recent Data on Land Price Increases
We have compiled the data on land price increases for "Sapporo," "Sendai," "Hiroshima," and "Fukuoka," comparing the average change rates from the previous year for residential and commercial lands as follows:
Compared to the average for regions outside the "three major metropolitan areas" (Tokyo, Osaka, Nagoya), the regional hub cities of "Sapporo," "Sendai," "Hiroshima," and "Fukuoka" are experiencing land price increases across all areas. While economic fluctuations may influence these trends, the potential for continued land price rises suggests that careful area selection could lead to stable returns in real estate investments.
Source: Ministry of Land, Infrastructure, Transport and Tourism | Annual Change Rates for Cities with Populations Over 100,000 in Regional Areas
2. Comparing Data on Population, Number of Businesses, City Employment Zone Population, and City Production (GDP)
The number of people and businesses is directly linked to real estate prices, and city production (GDP) is also a key indicator. Here are the data for Sapporo, Sendai, Hiroshima, and Fukuoka:
Sapporo leads in population with approximately 1.97 million residents. The number of businesses in Sapporo and Fukuoka are about 43,000, more than in Sendai and Hiroshima.
The city employment zone population, an indicator of commuting population, shows that Fukuoka leads among the regional hub cities. The city production (GDP) for Fukuoka and Sapporo is in the late 7 trillion yen range. Each regional city's large population and significant economic scale make them suitable for real estate investment.
Source:
Ministry of Economy, Trade and Industry | Annual Change Rates for Cities with Populations Over 100,000
Center for Spatial Information Science at the University of Tokyo | Urban Employment Area Population Data
Fukuoka City Council Secretariat Research and Legislation Division | Fiscal Year 2025 Designated City Basic Policy Comparison Study
Recommended Real Estate Investment Areas in Sapporo
Sapporo, the capital of Hokkaido, boasts a large area of approximately 1,121 square kilometers, nearly double that of Tokyo's 23 wards. Located in the northern part of the Japanese archipelago, it features a subarctic climate with heavy snowfall in winter and no rainy season, which is a major climatic characteristic. Here, we introduce two areas in Sapporo recommended for real estate investment.
1. Sapporo Central Ward
The Central Ward of Sapporo, known for its grid-like city layout, is attractive for its many government offices, businesses, and commercial facilities. It also houses historical buildings like the "Sapporo Clock Tower" and the "Old Hokkaido Government Office Building," making it a popular destination for tourists.
With high demand for single-occupancy rental apartments due to its being a business district, it is also popular among families due to its focus on child support services.
2. North Ward of Sapporo
The North Ward has the highest population of Sapporo's ten administrative wards, with about 280,000 residents. With numerous buses in addition to subways and JR trains, transportation within Sapporo is hassle-free.
It is home to universities such as Hokkaido University Sapporo Campus and Fuji Women's University North 16 Jo Campus, creating a high demand for student rentals. Also, with numerous child consultation centers and services like story reading at libraries, it is a balanced city popular among families.
Recommended Real Estate Investment Areas in Sendai
Sendai, the capital of Miyagi Prefecture, is known as "The City of Trees" for its lush greenery. Being one of the less snowy and more habitable areas in the Tohoku region, it has high rental demand, making it suitable for real estate investment. We discuss two particularly recommended areas in Sendai.
1. Aoba Ward of Sendai
Aoba Ward houses Sendai's largest transportation hub, Sendai Station. It is home to public institutions like Miyagi Prefectural Government and Tohoku University, and has the highest population of the five administrative wards in Sendai.
It is also easily accessible to popular tourist destinations such as the Sendai Castle ruins by bus from the station. For example, Sendai Station is accessible from Tokyo Station by Shinkansen in as little as 1 hour and 30 minutes. With a low rate of homeownership, there is high demand for single-assignment housing, making investment in one-room apartments likely to yield profits.
2. Taihaku Ward of Sendai
Taihaku Ward, with the second highest population in Sendai, is a bustling area. Accessible by the Subway Namboku Line, Tohoku Main Line, and Tohoku Expressway, it is well-connected by both train and car.
Sendai Airport is also nearby, making it a gateway to the city. Thus, investing in apartments targeting frequent business travelers can be an effective strategy.
The ward is home to one of Japan's top 100 waterfalls, the "Akiu Great Falls," and other rich natural environments, making it a popular area for those who prioritize the natural surroundings of their real estate investments.
Recommended Real Estate Investment Areas in Hiroshima
Hiroshima City in Hiroshima Prefecture offers both beautiful cityscapes and a fulfilling living environment. Home to world-renowned historical sites like the Hiroshima Peace Memorial and Itsukushima Shrine, it attracts tourists from all over the globe. Here, we introduce two areas within Hiroshima that are recommended for real estate investment.
1. Minami Ward of Hiroshima
The northern part of Minami Ward includes Hiroshima Station on JR West's conventional lines and the Sanyo Shinkansen. The southern part includes Hiroshima Port, which faces the Seto Inland Sea, providing ferry services to nearby cities like Kure and Matsuyama, as well as to islands within the ward.
The ward is a lively area due to its excellent access to other prefectures by land and sea. Additionally, it houses the home stadium of the Hiroshima Toyo Carp baseball team, Mazda Zoom-Zoom Stadium Hiroshima, adding to the area's vibrancy. With a wide range of age groups residing here, it is well-suited for real estate investments targeting a diverse demographic.
2. Asaminami Ward of Hiroshima
Asaminami Ward has the highest population of Hiroshima's eight administrative districts. It is also served by the Astram Line, Hiroshima's new transit system, ensuring well-developed transportation links.
The ward houses educational facilities such as kindergartens and nurseries, as well as hospitals specializing in pediatric emergency and perinatal maternal and child health care. It also offers numerous parks providing open spaces for parents to gather with their children. As a bedroom community, Asaminami Ward is highly rated by families.
Recommended Real Estate Investment Areas in Fukuoka
Fukuoka City in Fukuoka Prefecture is often referred to as "Japan's fourth-largest city," following Tokyo, Osaka, and Nagoya. As a compact city, it offers ease of living and integrates functions for business and leisure, making everything accessible within the city limits. Here, we focus on three areas within Fukuoka that are highly recommended for real estate investment.
1. Hakata Ward of Fukuoka
Hakata Ward features major transportation hubs such as Hakata Station, Hakata Port, and Fukuoka Airport, making it a gateway not just to Fukuoka but to all of Kyushu.
As a busy business district with a high proportion of people in their 20s and 30s, there is strong demand for rental housing from single individuals. Therefore, focusing on one-room apartments for real estate investment is advisable.
The Zasshonokuma area in the southern part of Hakata Ward retains a downtown atmosphere and is popular among residents. Additionally, the Naka area has seen increased popularity following the opening of Kyushu's first large shopping center, "LaLaport," in 2022, making it a suitable area for those seeking proximity to their workplace.
2. Chuo Ward of Fukuoka
Chuo Ward rivals Hakata Ward in popularity. Located in the center of Fukuoka City, it is known as a business and commercial hub. With comprehensive coverage by the Fukuoka City Subway and Nishi-Nippon Railroad buses, access to and from the city is exceptionally convenient.
The Tenjin area is lined with large shopping malls and department stores, offering ample shopping and dining options. The area also features numerous cafes and restaurants, providing a rich gastronomic experience.
Additionally, the ward is home to historical sites like Fukuoka Castle and Ohori Park. Ohori Park is also known as a high-end residential area, popular among the affluent. While property prices in the ward are somewhat higher compared to other areas, the convenience and quality of life make it a highly attractive long-term investment. A variety of properties, from new condominiums to used detached houses, are available, allowing for tailored property selection according to needs.
3. Higashi Ward of Fukuoka
Among Fukuoka's seven administrative wards, Higashi Ward has the largest population. Located in an area where one can experience the sea and islands, it also boasts large commercial facilities, balancing scenic beauty with convenience. Island City, constructed on an artificial island in Hakata Bay, is being developed as an "advanced city where environment and livability coexist."
The presence of numerous natural parks makes it popular among child-rearing generations, making family-oriented real estate investments likely to yield profits.
Summary
As we have introduced, Sapporo, Sendai, Hiroshima, and Fukuoka, the "four major regional cities," are among the most vibrant cities in Japan due to government-backed policies, redevelopment by the private sector, and robust inbound tourism.
These cities are core urban centers in their respective regions, offering convenient transportation and proximity to nature, with living costs significantly lower than in the "three major metropolitan areas" like Tokyo. As such, they are highly rated not only by locals but also by transferees and tourists.
Careful assessment is necessary to ensure that investment continues to generate positive cycles, but barring a global economic downturn, this momentum is likely to continue.
However, it is important to note the significant differences in market size and liquidity compared to the "three major metropolitan areas" like Tokyo. It is advisable to visit the area in person and consider it as a viable candidate for real estate investment.
Jul 24, 2024