The COVID-19 pandemic is becoming more severe in many parts of the world. Hope everyone is staying safe.
Art Avenue is taking necessary measures to prevent further spreading of the virus.
Under such situation, we have received voices of concern from our valued customers and business partners regarding the operation of our company and real estate industry.
Impact on the Real Estate Industry
As reported on news, hotels and private lodging are experiencing a major shock.
In Osaka, private lodging management company established bankruptcy as a result of COVID-19. We have also received rent reduce negotiations from a few lessee who are operating private lodging.
While the bank is not making any moves in terms of mortgage and home loans, purchase and sale transactions of properties have decreased according to some of our business partners.
Looking at this long term, companies will cut the number of hiring in the coming years. Which means that the demand for employee dormitory will drop as a result – increase vacancy.
Art Avenue is having one of our highest occupancy rate in March, so we are not expecting a significant damage.
However, we are also experiencing some impacts.
Rental Application
We are experiencing a huge number of cancellation of rental application.
In Mid-March, 4% of rental application were cancelled due to reasons related to COVID-19.
Employees getting laid off, suspension of housing subsidy, delay of school semester, leaving Japan, or infected by COVID-19…
Since April, there are over 25 cancellations up until today.
Moreover, many customers from oversea are not able to come to Japan due to the new immigration regulations. This also contributes a big portion of the above cancellations.
In such situation, tenant retention is extremely crucial. We are doing our best to have our current tenants stay for as long as possible.
Rent Negotiations
Next, is the increasing cases of rent negotiations.
For instance, one of our tenants holds a restaurant but is not making any profit due to the quarantine measure issued by the government.
After negotiating with the landlord, 3 months worth of rent is exempted.
Besides restaurants, many other industries are also impacted. Japan government has announced ”zero interest loan” measure, but some people don’t even have the money for tomorrow, leave alone keeping the business running.
We are expecting more rent negotiation coming on.
Others
Since the end of February, importing of equipment made in China has slowed down. This caused longer construction period and thus lead to longer vacancy.
In summer, it is expected that an increase number of air conditioners will need repairs. To avoid overload, we are asking tenants to test run their air conditioners now.
Japan’s government has issued an emergency alert in 7 prefectures a day ago. While some companies shift to working from home, there are still a certain number of people commuting to work everyday without a choice.
For people who can stay home, please do so to protect yourself and your loved ones.
