Continuing in the vein of our previous post, last August the weekly magazine Shukan Gendai ran an article that revealed an “unwritten” belief among real estate agents in the Tokyo metropolitan area that says tower condos will start to “fall into ruin” starting in 2022. The choice of terminology is interesting here and, apparently, quite literal in that the towers themselves will start to deteriorate in ways that will make it difficult to maintain these buildings for many years into the future. The article describes in credible detail how tower condos differ from other condos, in terms of both structural design and real estate value, and how these differences manifest over time.
Gendai starts out with a profile of a tower condo that was built 15 years ago, or around the time that tower condos were making their debut in Tokyo and surrounding areas. Unfortunately, the article doesn’t say exactly where the condo is, but it contains 400 units, of which only 30 percent are occupied at the time the article was written. The facade is riddled with cracks and the entrance to the building is surrounded by overgrown weeds. The building also has a gym, which apparently has been closed for several years already. The current residents are described as people who have “nowhere to go,” thus implying they would like to move if they could, but the value of their properties has dropped so low that even if they were able to sell their apartments they wouldn’t receive enough money to cover a down payment on another condo. And yet, as the article attempts to point out, the overall popularity of tower condos in Tokyo is currently peaking.
As we previously wrote, tower condos are defined as collective housing complexes of at least 20 floors. Between 2008 and 2017, 341 new tower complexes were built in the Tokyo metropolitan area comprising 111,722 units. It was, according to Gendai, a phenomenon that “no one could have imagined” and, in fact, may have been too good to be true. Realtors have always been suspicious of the tower boom, since there was the obvious danger of oversupply, but to developers towers were the geese that just kept laying golden eggs, so they kept building them. Presently, they are still being erected in the Tokyo harborfront area on landfill, and in suburbs that are conveniently situated for easy access to the city center, such as Kawaguchi in Saitama Prefecture and Musashi Kosugi, which was described in our previous post. Now, some ambitious developers are eyeing certain areas of Tokyo for “redevelopment” with tower condos, such as Tsukishima, which is filled with older low-rise buildings.
The reason a reckoning has come due for tower condos is that the normal repair cycle for condos of any size is ideally 15 years, so if the tower condo movement started in 2000, that means many of those belonging to the first generation are overripe for large-scale renovation. Such regular maintenance is difficult enough to carry out for conventional condo buildings, since management and homeowners associations have to work together to set a schedule and budget, but for towers the difficulties are compounded by the higher number of owners and the astronomical costs associated with doing repairs on very tall structures.
Normally, the first phase of repair work in on the facade, followed by work on the elevators and the internal plumbing, so the first generation of condos are still doing facade work. Gendai estimates that it takes at least ten years to carry out all the repair work on a tower condo, and upwards of a billion yen, depending on how many floors/units are involved. As an example, they use the Elsa Tower 55 in Kawaguchi, one of the first tower condos in Japan, which was finished in 1998: 55 stories, 650 units, 186 meters high. Repairs were started in 2015, and, miraculously, it only took two years to finish and cost about ¥1.2 billion. On average, that comes to about ¥1.85 million per homeowner. According to a housing journalist who watched the process closely, however, the two-year completion period is slightly misleading. It was in 2007 that the homeowners association established a repair committee to make a plan, and they didn’t start accepting bids for the work until 2012. They finally chose a contractor in 2014. So from planning to completion, the entire repair process did take ten years, but as the journalist points out this is considered a “very successful case” because most of the property owners in Elsa Tower actually live there. That means the homeowners association is strong in that it can count on all members to participate to a certain extent. However, units in newer towers over the years have increasingly been sold to absentee owners, meaning they were bought as investments either as rental properties or as apartments to be flipped as the value increased. In addition, after 15 years, it is likely that more units in a given building are not owned by the people who bought them when the building was first opened. And as realtors and building management companies know, investment owners are notorious for not being involved in homeowners assocation business. According to the law, a certain minimum percentage of homeowners must approve of decisions made by the board in order for them to be implemented, so the process of planning repairs, not to mention bidding and contracting operations, will take longer.
On top of that is the monthly shuzen or long-term repair fund that all homeowners have to pay. In order to presell units as quickly as possible before construction of a new condo is completed, developers set the shuzen fee artificially low, which means 15 years down the line the fund is often inadequate to cover all the repair costs, and that means each homeowner will have to throw in additional money to have the repairs carried out. In a tower condo, this extra expense can be very large since they often contain more common facilities, such as gyms and more elevators. The developer’s pitch to potential buyers is the greater the number of units, the lower each has to pay in terms of monthly fees, but, actually, in terms of repair fees, tower condos cost so much more that per-unit costs are higher than they are for smaller buildings. In the end, these added costs cause considerable friction among homeowners in the same building, especially if some live there and some don’t.
The issue is that older tower condos will become more difficult to sell regardless of their location, because the older they are the more repairs they will require, and potential buyers will be faced directly with these costs. Many will probably opt for lower rise condos whose shuzen fees are much smaller.
So the future of tower condos is not at all assured, even as city planners with a feeling for environmental impact and sustainability advocate for greater urban density. There is such a thing as having too many people in one building. Conventional condos satisfy sutainability issues perfectly well. You don’t have to live in the clouds to help your city maintain a healthy environmental footprint. Besides, living in the clouds isn’t what it’s cracked up to be.