Japan's declining population is having a serious impact on rental management. According to statistics from the Ministry of Internal Affairs and Communications, Japan's population in 2024 will be approximately 800,000 fewer than the previous year, and this trend is expected to continue. Under these circumstances, the biggest challenge facing rental property owners is to address vacancies.
It is no longer possible to maintain full occupancy using conventional rental management methods. However, by adopting appropriate strategies and practical approaches, it is possible to achieve stable rental management even in an era of declining population. This article presents 10 specific strategies to improvevacancy rates and increase occupancy.
These strategies are based on the know-how that INA & Associates, Inc. has accumulated through years of real estate investment consulting experience, and are proven methods that have actually produced results for many owners. We will explain in detail what measures should be taken to address the structural issue of a declining population, along with specific cost-effectiveness measures.
The rise in vacancy rates has become a prominent nationwide trend. According to the Ministry of Internal Affairs and Communications' Housing and Land Survey, the national vacancy rate reached 13.8% in 2023, a record high. Especially for rental properties, although there are regional differences, prolonged vacancy periods are becoming a serious problem in many areas.
The impact of population decline varies greatly by region. According to future projections by the National Institute of Population and Social Security Research, approximately 60% of municipalities in Japan are expected to see their population decline by 20% or more by 2040. In regional cities in particular, a fundamental decline in rental demand is inevitable due to the exodus of young people to urban areas.
Meanwhile, in the major cities of the Tokyo metropolitan area and the Kansai region, the impact of the population decline is relatively minor, but changes in household composition and the diversification of housing needs are making it difficult to maintain competitiveness in conventional rental properties. Vacancy countermeasures are needed to respond to changes in the social structure, such as the increase in the number of single-person households, the aging of the population, and the prevalence of remote work.
Changes in the demand structure in the real estate market involve more complex factors than a simple population decline. Lifestyle changes triggered by the Corona Disaster have drastically changed the functions and location requirements for housing.
In the past, the convenience of being near a train station was the most important factor, but today, floor plans and facilities suitable for telecommuting, as well as the quality of the surrounding environment, are also important selection criteria. In addition, with the rise in environmental awareness, an increasing number of tenants are placing importance on energy-saving performance and sustainability, and even older properties have the potential to regain competitiveness by undergoing appropriate renovations.
Another factor that cannot be overlooked is the increase in foreign tenants. Due to the government's policy of accepting more foreign workers, demand for rental properties for foreigners is increasing in certain areas. In order to respond to this diversifying demand, strategic vacancy countermeasures with clear targets, rather than the traditional one-size-fits-all approach, are essential.
Reducing the initial cost burden at move-in is an extremely effective first step in vacancy countermeasures. Measures to reduce the financial burden on tenants, such as reducing security deposits and key money, introducing installment payments, and establishing rent-free periods, can lead to a significant increase in the number of inquiries.
Initial costs are a major barrier to moving in, especially for younger tenants and those changing jobs. In many cases, simply reducing the security deposit from 1 month to 0.5 months can increase the number of inquiries by 10-20%. Also, by eliminating key money and adding it to the monthly rent, initial costs can be reduced while maintaining long-term profitability.
It is also important to provide flexibility in contract terms. In addition to the traditional two-year contract, one-year and short-term contract options can be offered to meet the needs of transferees and short-term residents. Such flexible contract terms are an effective approach that directly leads to higher occupancy rates.
The level of facilities demanded by today's tenants is increasing year by year. Of particular importance are Internet access, air conditioning, and security equipment. Free Wi-Fi environment is now a prerequisite, and fiber optic line compatibility determines the basic competitiveness of a rental property.
As for air conditioners, updating to the latest models with high energy-saving performance is effective. Although an initial investment of 100,000-300,000 yen is required, the improvement in tenant satisfaction and reduction in electricity costs will contribute to long-term full-occupancy management. In addition, with the spread of remote work, indoor comfort is becoming more important.
In terms of security, the installation of auto locks, security cameras, and delivery boxes are particularly effective. For single female tenants and the elderly, safety is an important factor in property selection. These capital investments often allow rents to be set higher than the surrounding market rate, with a typical payback period of 12-18 months.
For older properties, strategic remodeling/renovation is the decisive factor in preventing vacancies. Particularly effective are updating the water system, replacing flooring, and replacing wallpaper. These basic renovations can significantly improve the impression of a property.
In more extensive renovations, by changing the floor plan and installing the latest equipment, even older properties can become as competitive as new buildings. For example, changing a Japanese-style room to a Western-style room and introducing a face-to-face kitchen can provide a living space compatible with modern lifestyles.
Renovation costs are generally in the range of 500,000-1,500,000 yen, but if properly implemented, rents can be increased by 20-30%. Although a payback period of 12-24 months should be expected, it is an essential investment to stabilize rental management over the long term.
An advertising strategy that adequately conveys the attractiveness of the property is extremely important in addressing vacancies. In particular, improving the quality of photographs has a direct impact on the number of viewings. Professional photographers and virtual tours can maximize the appeal of a property.
The use of Internet advertising is also effective. By ranking higher on real estate portal sites and disseminating information through social networking services, you can reach a larger number of potential tenants. Especially when targeting a younger demographic, the use of visual platforms such as Instagram and TikTok can be effective.
It is also important to specifically promote the features of the property and the attractiveness of the surrounding environment. Providing detailed information not only on the distance from the nearest station, but also on nearby commercial, educational, and medical facilities can evoke a concrete image of life for prospective tenants.
Close cooperation with management companies is essential to achieve effective vacancy management. Management companies have a wealth of information on market trends and tenant needs, and by utilizing this information, more effective measures can be taken.
By sharing regular market analysis reports and understanding the trends of competing properties, appropriate rent setting and renovation plans can be developed. In addition, by utilizing the management company's network to recruit tenants, it is possible to reach a wider range of tenants.
It is also important to consider reviewing the terms of contracts with management companies. A performance-based contract or an incentive system based on an increase in the occupancy rate can motivate the management company to improve its performance.
By accepting a diverse range of tenants rather than sticking to the traditional target demographic, vacancy risk can be reduced. For example, you can differentiate yourself by responding to niche demand by changing to pet-friendly properties, accepting foreign tenants, and enhancing services for the elderly.
While the absolute number of pet-owners is limited for pet-allowed properties, there are few competing properties, so setting appropriate conditions can secure stable tenants. The risk of increased restoration costs due to pet-ownership can be mitigated by increasing the security deposit and using dedicated insurance.
Although multilingual support and cultural considerations are required to accommodate foreign tenants, it may be possible to eliminate vacancies that cannot be filled by Japanese tenants. Especially in areas with a large number of technical interns and foreign students, stable demand can be expected.
Optimizing rent setting is the most basic and important element of vacancy countermeasures. Rent setting that deviates significantly from the market rate is a major cause of long-term vacancy. It is necessary to maintain appropriate rent levels through periodic market surveys.
Although a reduction in rent means a decrease in profitability, compared to the opportunity loss caused by long-term vacancy, an adjustment to an appropriate level is a reasonable decision. For example, if a property with a monthly rent of 100,000 yen is vacant for three months, the opportunity loss is 300,000 yen. If the rent is reduced to 90,000 yen per month and the tenant moves in immediately, the annual loss is reduced by 180,000 yen.
Adjusting rent in stages is also an effective method. By setting the rent higher than the market rate for the first three months and adjusting it in stages if the response is poor, the optimal price range can be found.
Providing good post-occupancy services will encourage long-term occupancy and attract new tenants through word-of-mouth. 24-hour call center service, regular cleaning services, prompt response to facility maintenance, and other services directly related to tenant satisfaction are all important.
Enhancing common areas is also effective. Delivery boxes, bicycle parking lots, and garbage disposal facilities can improve the convenience of daily life. In addition, shared lounges and working spaces can provide added value for modern lifestyles.
Events for residents and support for community building will also contribute to promoting long-term tenants. Through seasonal events and disaster drills, residents can deepen their connection with each other, thereby increasing their attachment to their living environment.
In order to differentiate a property from competing properties, it is important to clarify the property's unique features and concept. For example, branding that focuses on specific lifestyles and values, such as "pet-friendly condominiums," "artist housing," or "secure housing for seniors," can be effective.
Improved design is another important element of differentiation. Improving the design of entrances and common areas, coordinating interiors with a sense of unity, and promoting greening can enhance a property's appeal.
A review of the property name and logo is also worth considering. A name that is easy to remember and expresses the characteristics of the property can improve brand recognition.
To maximize the effectiveness of vacancy countermeasures, continuous improvement based on data is essential. By analyzing tenant demographics, investigating reasons for moving out, and understanding market trends, more effective measures can be taken.
By accumulating and analyzing data on tenancy duration, reasons for moving out, and tenant satisfaction, we can clarify issues and areas for improvement for the property. In addition, by understanding demand fluctuations due to seasonality and economic conditions, it is possible to implement countermeasures at the appropriate time.
The use of digital tools is also important. Property management systems and customer management systems enable efficient data collection and analysis. These systems allow for ongoing optimization of rental management.
| Measure Contents | Initial Cost | Expected Effectiveness | Investment payback period | Degree of difficulty | Recommendation |
|---|---|---|---|---|---|
| Review of security deposit and key money | 0 yen | 10-20% increase in inquiries | Immediate effect | Low | ★★★★★ |
| Equipment renewal (air conditioner, etc.) | 100,000-300,000 yen | Rent maintenance and 5-10% improvement | 6-12 months | Medium | ★★★★☆ |
| Interior renovation | 500,000-1,500,000 yen | Increase rent by 20-30 | 12-24 months | High | ★★★★☆ |
| Update ad photo | 30,000-50,000 yen | 30-50% increase in number of viewings | 1-3 months | Low | ★★★★★ |
| Security enhancement | 200,000-500,000 yen | Resident Satisfaction Improvement | 12-18 months | Medium | Middle |
| Change of management company | 0-100,000 yen | 10-20% increase in occupancy rate | 3-6 months | Medium | ★★★★☆ |
| Rent optimization | 0 yen | Shorten vacancy period | Immediate | Low | ★★★★★ |
| Pet friendly | 50,000-150,000 yen | Niche demand capture | 6-12 months | Medium | ★★★☆☆ |
This is a case study of a 30-year-old studio apartment building that was renovated for a total cost of 1.2 million yen to address vacancies. Although the property is located a 10-minute walk from the station, it had been vacant for 6 months due to the age of the building and aging facilities.
The renovations that were implemented included replacing the unit bath (400,000 yen), flooring (300,000 yen), kitchen equipment (250,000 yen), air conditioner (150,000 yen), and all wallpaper (100,000 yen). These renovations made it possible to set the rent from 60,000 yen to 75,000 yen, and a tenant was decided within one month after the renovations.
The payback period was approximately 8 months, and total revenue was greatly improved by continuous occupancy for the next 2 years. This case study demonstrates that improving the basic performance of a rental property can restore its competitiveness.
This is a case study of a family-oriented condominium in a regional city that achieved full occupancy by changing the target group. Initially, the property was managed as a 3LDK family apartment, but due to the declining population in the area, it had become difficult to secure tenants.
Therefore, partitions were added and the property was converted to a shared house format and reconstructed as a residence for singles. By providing a shared living room and kitchen and private rooms of about 6 tatami mats, we were able to create a fulfilling living environment while reducing the rent burden.
This change enabled us to secure an income of 210,000 yen (6 private rooms x 35,000 yen = 210,000 yen) instead of the previous rent income of 120,000 yen (3LDK). The initial investment was approximately 2 million yen for partitioning and renovation of common areas, but the increased income enabled the company to recoup its investment in 12 months.
This is an example of a successful vacancy countermeasure with minimal investment under budget constraints. A 15-year-old studio apartment building was renovated for a total cost of 150,000 yen to secure tenants.
The measures implemented included photography by a professional photographer (50,000 yen), partial wallpaper replacement (30,000 yen), replacement of lighting fixtures (20,000 yen), review of security deposits and key money (0 yen), and thorough cleaning (50,000 yen). These relatively minor improvements significantly improved the impression of the property.
Particularly effective was the improvement of photography. By changing the photos from the traditional dark impression to brighter, more attractive ones, the number of inquiries on the Internet tripled. This example shows that a strategic approach can improve occupancy rates without necessarily making large investments.
| Regional Characteristics | Priority Measures | Approximate investment budget | Expected Effects | Points to note |
|---|---|---|---|---|
| Urban area, near station | Facility renewal and interior improvement | 1 - 2 million yen | 10-20% increase in rent | Important differentiation due to many competitors |
| Suburban, family-oriented | Improved parking and storage | 500,000-1,000,000 yen | Shorten vacancy period | Must cope with the car-oriented society. |
| Student Town | Initial cost reduction, furnished | 300,000-800,000 yen | Improvement of occupancy rate | Be aware that many students move out during graduation season |
| Areas with many elderly residents | Barrier-free and safety measures | 800,000-1,500,000 yen | Promote long-term occupancy | Cooperation with medical and nursing care facilities |
| Tourist attractions and resorts | Short-term stay support, Wi-Fi enhancement | 40-1.2 million yen | Profitability improvement | Responding to seasonal fluctuations |
It is clear that there are limits to conventional methods for addressing vacancies in an era of declining population. However, with appropriate strategies and continuous improvement, it is quite possible to achieve full occupancy even in this challenging environment.
The key is to accurately identify changes in the market environment and respond to the diversification of tenant needs. Rather than a one-size-fits-all approach, customized measures are required according to the characteristics of the property, its location, and target demographics.
It is also important to focus on stabilizing rental management over the long term rather than maximizing short-term earnings. By increasing property value through appropriate investments and building a sustainable profit structure, we can address the structural challenge of a declining population.
Begin with an objective analysis of the current property situation. An understanding of the current situation based on data such as vacancy rate, average occupancy period, comparison with the surrounding market, and tenant demographics will form the basis for formulating countermeasures.
Next, from the 10 strategies outlined in this article, determine the order of priority according to the property's situation and budget. It is not necessary to implement all measures at the same time. It is important to implement the most effective measures in stages, and then verify the results while considering the next measures.
Finally, proactively utilize collaboration with experts. More effective vacancy countermeasures can be achieved through cooperation with consultants with expertise in real estate investment and management companies that are familiar with local market trends.
The budget for vacancy countermeasures varies greatly depending on the condition of the property and the expected effect. Generally, it is recommended that 10-20% of the annual rental income be set aside for renovation and countermeasures.
For example, for a property with a monthly rent of 100,000 yen, it is appropriate to budget 120,000-240,000 yen for an annual income of 1.2 million yen, and to implement facility renewal or minor renovation as necessary. If a large-scale renovation is required, an investment of 50-100% of the annual rental income is also worth considering, but the payback period should be carefully considered.
The period of time for the effect to appear varies greatly depending on the details of the measures taken. Changes in terms and conditions, such as reviewing security deposits and key money or adjusting rents, have an immediate effect, and changes in the number of inquiries can be confirmed within 1-2 weeks after implementation.
In the case of facility renewal or minor renovation, the effect is generally visible in 1-3 months. In the case of large-scale renovations, it takes 3-6 months including the construction period, but a significant effect can be expected.
The decision as to which entity to implement vacancy countermeasures depends on the resources and expertise of the owner. For market research and tenant recruitment, it is more efficient to ask a management company with expertise and a rich network.
On the other hand, it is important for the owner to be proactively involved in the property's renovation policy and investment decisions. Rather than relying on proposals from the management company, you are required to consider multiple options and carefully evaluate their cost-effectiveness.
Remodeling refers to the repair or updating of existing facilities and interiors, and its main purpose is to restore them to their original state or improve their functionality. Renovation, on the other hand, refers to large-scale renovations that include changes in floor plans and use, and its main purpose is to increase the value of the property or change its use.
In addressing vacancies, it is important to select the appropriate method according to the property's condition and market needs. For newer properties, renovation can be expected to be sufficient, but for older properties or in markets where competition is fierce, a drastic improvement through renovation may be necessary.
Even in areas with declining populations, it is possible to find investment value with the right strategy. The key is to accurately understand the characteristics and potential of the area.
For example, areas with universities or large factories may continue to experience a certain level of rental demand. In addition, areas that are tourist destinations or transportation hubs may have the potential for short-term stay demand or specific uses. However, since a long-term trend of population decline is inevitable, comprehensive investment decisions, including exit strategies, must be made.