Renting Commercial Retail Space in Japan

Renting commercial retail space in Japan is a bit different from renting apartments or homes. While there are some similarities in the renting process, it is important to know in advance the points of caution, the related fees, and the actual procedures for renting a property to set up a shop.

In this article, we explain how to search for commercial retail space, the general renting procedure, and some points of caution as well as the necessary documents.

General Procedure for Renting Commercial Space

The procedure for renting commercial retail space is similar to that for renting an apartment. The general procedure is as follows.

1. Search for a property that meets your requirements
2. View the actual property
3. Make an application
4. Screening process
5. Contract signing

While the procedure may be similar to that for house hunting, the conditions of your property search and the fees involved are quite different. One important condition you need to consider is whether the property has existing furnishings (inuki bukken) or unfurnished (skeleton bukken), as this is a major factor in the price of the property.

It is also quite important to thoroughly identify the conditions you require for your shop, as this can greatly influence whether or not your business will succeed.

Important Points to Consider

The following are some important points you should consider when renting commercial retail space in Japan.

Shop Location and Floor Area

While you may want to open up a shop in the middle of a major commercial district or near a train station, you should keep in mind that such locations are in high demand, so rents are high and vacancies are rare. When choosing a location, it is important to consider who your target market is as well as your sales projections.

The following are some points you should consider when choosing a location and floor area for your shop.

・Who is your target market?

・Does the location allow you to reach your target market?

・Do your prices match the market prices in the location you are considering?

・Can you meet your sales projections?

・Can your sales cover your overhead costs?

Rent

The monthly rent for your retail space is basically calculated through the following formula:

Floor area (tsubo = a Japanese unit of area roughly equal to 3.3 m²) ×　rent per tsubo

The better the conditions of your location, the higher the rent per tsubo becomes. The rent per unit area is generally fixed according to the specific location. You can also go on property listing sites to search for a property with a specific rent range in your preferred location.

The rent per tsubo also depends on the total floor area of the property. Properties that are 20 tsubo (66 m²) or less are popular with individual business owners. Smaller properties with areas of 10 tsubo (33 m²) or less tend to have higher unit prices per tsubo.

Having an idea of typical monthly rents depending on the size and location can be useful when deciding on a property. If it is cheaper or more expensive than the going rate in the area, you should check for any factors that is affecting its price during the property viewing.

Things to Check in Furnished Properties (Inuki Bukken)

The property viewing is an important process that allows you to check for things like leaks, damage, and other conditions in the property and its surrounding area. Commercial properties are usually available with existing furnishings (inuki bukken) or unfurnished (skeleton bukken). When viewing a furnished property, you should check the following items:

1. The handover date and the actual condition on handover (which furnishings will be available)
2. The condition of the property interior
3. The condition of the furnishings and appliances themselves (whether they function properly)

While inspecting the property, you should identify and plan for any necessary remodeling or additional furnishings. It is also a good idea to inspect the property together with an interior decorator so you can get an estimate of the costs in case you plan to remodel the interior.

Fees for Renting Commercial Retail Space

The initial costs required for renting a commercial retail property in Japan is roughly equivalent to 10 times the monthly rent. The individual fees usually include the following:

・Security deposit (hoshokin or shikikin)

・Broker’s fee or commission

・Key money (reikin)

・Advance rent

If you are renting a furnished property, you may also need to pay for the following fees:

・Transfer fee: the cost of buying the furnishings from the previous tenant

・Handling fees: this varies depending on the agent, and can be 5 – 10% of the transfer fee or around 300,000 to 500,000 yen per contract.

Required Documents for Application and Contract Signing

Once you have decided on a commercial property and you want to start renting it, you will need to prepare the following documents

Required Documents to Make an Application

・Application form: this varies depending on the real estate agency

If you are renting as an individual:

・Identification documents for yourself and your guarantor

If you are a foreign resident, you can use your Residence Card.

If you are renting as a company or organization:

・Corporate registration certificate

・Identification document for your guarantor

Required Documents for Contract Signing

The required documents for contract signing vary depending on whether the renter is an individual or a company. The following are some of the typically required documents.

Required for both individuals and companies:

・Signing fee: this is usually paid in advance by bank transfer to the account of the real estate agency, though it can be paid during or after the contract signing in some cases.

Required for individuals:

・Residence certificate of the renter and guarantor

・Identification document of the renter

・Registered seal and seal registration certificate

・Proof of income

・Guarantor consent form

Required for companies:

・Corporate registration certificate

・Registered seal and seal registration certificate

・Residence certificate, identification document, seal registration certificate of the guarantor

・Guarantor consent form

There may be other required documents depending on the property, so you should check with the real estate agent in advance to have ample time to prepare them.

Summary

In this article, we explained some important items to consider when renting commercial retail space in Japan. As a foreign resident, it may seem difficult to rent a space and open a shop in Japan. But it is a fairly straightforward process if you are aware of the important points to and the related fees and procedures. We hope this serves as a useful reference for your commercial property search.