Can’t Fill the Vacancies in Your Building? The Answer Might Be Converting It Into a Hospitality Property

For owners of small and mid-sized buildings in Osaka City, the recent shifts in office demand present a serious challenge. More and more owners find themselves struggling with problems like “tenants won’t move in even after lowering the rent” or “the building is aging, and equipment upgrade costs just keep piling up.”

Let’s get straight to the conclusion of this article.

For aging buildings that have lost their competitive edge as offices, or mixed-use buildings plagued by vacancies, converting to a hospitality property (hotel or minpaku/vacation rental) is the solution with the most dramatic potential to improve profitability.

Osaka is a globally renowned tourist destination with extremely high demand for accommodation. Even if a building’s value as office space has declined, there’s real potential to revive it as a high-value lodging asset by leveraging its location and structure. In this article, we’ll explain the benefits of converting a building into a hospitality property and the key points for making it a success.

Why “Converting Buildings into Lodging Facilities” Is Gaining Attention in Osaka Right Now

Osaka City’s real estate market is experiencing a major supply-demand mismatch between office space and accommodation.

The Polarization of Office Demand

While tenants flock to newly built, large-scale intelligent buildings, small and mid-sized buildings are increasingly plagued by vacancies. Once a unit becomes vacant, it gets pulled into a rent-cutting race against similarly specced buildings, often falling into a negative spiral of continually declining asset value.

Overwhelmingly Strong Demand for Accommodation

In stark contrast, the lodging market is booming thanks to the surge in inbound tourism. There is a particularly severe shortage of spacious rooms that can accommodate families and groups. Office buildings typically have large floor areas per level, and by getting creative with room partitions, owners can create “spacious rooms designed for larger groups” that major hotel chains simply can’t replicate.

Osaka City’s Unique Advantage: “Tokku Minpaku” (Special Zone Minpaku)

Osaka City benefits from a special exemption as a “National Strategic Special Zone,” allowing 365-day-a-year operation when certain conditions are met. By converting an entire building into a minpaku property, owners can effectively operate it just like a hotel, maximizing revenue potential.

3 Major Benefits of Converting a Building into a Lodging Facility

Converting to a hospitality property offers a wide range of advantages compared to continuing with office leasing.

1. A Dramatic Increase in Per-Unit Profitability

Space that used to rent for around ¥15,000 per tsubo as office space can generate revenue of tens of thousands of yen per night when operated as a lodging facility. Depending on occupancy rates, it’s not uncommon to see revenue that’s 2 to 3 times higher than office rental income—and in some cases, even more.

2. Turning “Age” Into a Selling Point

While a building’s age is a drawback in the office market, it becomes an added value in the hospitality world—translating into “retro charm,” “vintage appeal,” or an authentic “Japanese atmosphere.” By renovating in a way that highlights the building’s unique structural features, such as exposed concrete or high ceilings, owners can create a distinctive character that new-build hotels simply can’t offer.

3. Strengthening Your Exit Strategy (Resale Value)

Real estate value is ultimately determined by the income the property generates (income capitalization value). A building running a highly profitable lodging business is viewed by investors as a “high-yield property” and valued accordingly. There are many cases where a building once considered unsellable due to vacancies has seen its appraised value increase by hundreds of millions of yen after converting to a lodging facility.

Hurdles to Success: Key Considerations for Use Conversion

While converting to a lodging facility is appealing, there are legal and physical hurdles that must be cleared.

“Change of Use” Under the Building Standards Act

Changing a building’s designated use from “office” to “hotel/inn” often requires a building confirmation application (change of use). This is especially important when the floor area exceeds 200 square meters, in which case verification of legal compliance by a licensed architect or other specialist is essential.

Compliance With Fire Safety Equipment Standards

Lodging facilities are subject to stricter fire safety standards than offices. Investment in equipment such as automatic fire alarms, emergency lighting, sprinklers, and flame-retardant curtains is necessary to ensure guest safety. Estimating these costs in advance is key to a successful project.

Building an Operational Structure

Running a lodging business is a genuine hands-on operation—it’s not simply a matter of leasing space and waiting for tenants. Day-to-day operations include cleaning, guest support, reservation management, and pricing strategy (revenue management). Since handling all of this in-house is difficult, finding a trustworthy management partner is essential.

Conclusion: Opening Up Your Building’s Future Through Hospitality

There’s no need to keep lamenting the vacancies in your building. Shift your perspective, and those empty spaces become “untapped potential capable of generating enormous revenue.”

1. Pay attention to Osaka’s powerful demand for accommodation
2. Consider a hospitality conversion that highlights your building’s unique character
3. Navigate regulations and build an operational structure with the help of professionals

By following these steps, your building could be transformed into the most sought-after accommodation in the area. To bring your building’s asset value back to life, why not seriously consider converting it into a lodging facility?

For Maximizing Your Building’s Revenue, Trust the Professionals in the Lodging Business

“I’m interested in minpaku or hotel operations as a way to address the vacancies in my building, but I don’t know where to start.”

“I want to understand the costs involved in changing the building’s use, and get a revenue simulation for after opening.”

“I’m looking for a partner who can handle everything from the hassle of permit applications to day-to-day cleaning and operations.”

Whatever your concerns, we can solve them all.

Stay Buddy Inc. is a team of hospitality and minpaku management professionals specializing in Osaka City.

We are more than just a management outsourcing company.

• Planning and proposals for conversions (change of use) that maximize your building’s potential
• Building high-profit models by making full use of Osaka City’s “Tokku Minpaku” (Special Zone Minpaku) system
• Low-cost operations powered by DX tools, paired with hotel-standard, high-quality cleaning management
• Maximizing revenue through meticulous pricing strategies based on local area data

Leveraging these strengths, we have helped many building owners transform their assets into highly profitable lodging facilities.

We’ll help turn the hidden value in your building into solid, tangible results. Get started with a free property assessment and revenue simulation—feel free to reach out anytime.