Vacancy & Rent-Decline Defence

1. The three population trajectories

• Growing renter pool: Tokyo 23 wards (central 6), Yokohama central, Osaka Kita/Chuo, Fukuoka central, Nagoya central. Household counts still growing despite population dip.
• Stable: Sapporo, Sendai, Hiroshima, Kobe cores. Household count flat. Rent stable in real terms.
• Declining: Everywhere else. Regional cities losing 1–2%/year of working-age population. Rents drift down 1–3%/year, vacancy rises structurally.

2. Micro-market matters more than city

Adachi 足立区 (Tokyo) has higher vacancy than Fukuoka central. Sub-station-level demand (station walk-time, morning commute frequency, proximity to hospitals/schools) beats city-level demographics.

3. Underwriting rules

1. Base case: current asking rent × (1 − vacancy rate) × 0.98 per year for 10 years.
2. Stress case: −5% rent shock in year 3, +5% vacancy sustained through year 5.
3. Cliff case: rent drops 15%, vacancy 15% — does the deal still service debt?

4. Defensive property attributes

• Under 7-min walk to a JR / metro station on a growing corridor
• Grocery + convenience within 3 min
• Hospital or major employer within 15 min
• Universally-liked layout (1K/1LDK for singles, 2LDK for young families)
• Modern earthquake-code (post-1981 “new seismic standard”)

5. Signals to walk away

• 15+ min walk to any station
• Population density falling and no employer anchor
• 3+ competing new-build supply pipelines within 500m
• Local rent asking has dropped consecutively for 3+ years

The safest yield is 30 bps lower than the best yield you can find in the same city. If you're getting an outlier yield, ask what the market knows that you don't.