Japan redevelopment delays reach central Tokyo as building costs rise

Redevelopment projects across Japan are increasingly being delayed, scaled back or cancelled as soaring construction costs undermine project economics. What began as a regional “wait-and-see” trend is now spreading to prime central Tokyo, including redevelopment plans involving the Grand Prince Hotel Shin Takanawa and the Imperial Hotel Tokyo.

With material costs expected to rise further amid worsening tensions in the Middle East, developers have few signs of relief.

Regional Projects Were the First to Feel the Pressure

Redevelopment delays and cancellations have been spreading across regional cities. At the end of 2025, Nagoya Railroad scrapped its redevelopment plan for Meitetsu Nagoya Station. JR Kyushu also cancelled a plan to build a mixed-use complex above the tracks at Hakata Station.

The pressure is also visible in Gifu, where a redevelopment project in front of JR Gifu Station has been forced into revisions. Two buildings are being developed as part of the station-front project, but according to the project association, the general contractor responsible for the design withdrew in March 2025, citing rising construction material and labor costs.

Another general contractor has since taken over the building in the eastern district, but more than a year later, the western district is still seeking a replacement company. In February 2025, the project had already announced that both buildings would be reduced in height from the original plan because of rising construction costs.

The main factor behind these changes is the sharp rise in construction costs. Materials such as steel surged in price following Russia’s invasion of Ukraine, while labor costs have also risen due to worker shortages and the impact of Japan’s so-called “2024 problem” in the construction industry, when stricter overtime regulations came into effect.

JR Kyushu cited the near doubling of estimated construction costs, from an initial ¥43.5 billion, as one reason for cancelling the Hakata Station project.

Regional cities generally have lower rents than Tokyo, making it harder to recover investment when construction costs rise sharply. In some cases, developers have been forced to scale back projects in order to keep them viable. JR Hokkaido is expected to reduce the planned height of a redevelopment project directly connected to Sapporo Station while also delaying the start of construction and the completion schedule.

Pressure Now Reaches Central Tokyo

The wave of redevelopment delays is no longer confined to regional cities. It is now spreading to major central Tokyo projects, including the Grand Prince Hotel Shin Takanawa in Minato Ward and the Imperial Hotel Tokyo in Chiyoda Ward.

“We are carefully reviewing the schedule,” said Takeo Harada, head of corporate planning at Seibu Holdings, referring to the redevelopment of the Grand Prince Hotel Shin Takanawa, a five-minute walk from JR Shinagawa Station.

The plan calls for the construction of a mixed-use complex housing a hotel, offices and other facilities, with work originally scheduled to begin in fiscal 2028. The hotel had been expected to close during fiscal 2026 to make way for demolition, but Seibu has decided to keep it operating for the time being.

Although the redevelopment plan itself remains in place, a review of the schedule and other details now appears unavoidable.

The Imperial Hotel Tokyo redevelopment is another sign that cost pressures are reaching some of Japan’s most prestigious real estate locations. At the end of March, it emerged that demolition work on the hotel’s Tower Building would begin around the end of fiscal 2030, roughly six years later than originally planned.

Imperial Hotel exterior courtesy of the hotel website.

The timing for rebuilding the hotel’s main building, previously planned for fiscal 2031 to fiscal 2036, is now undecided. The Imperial Hotel had planned to work with Mitsui Fudosan and others on an integrated redevelopment of the surrounding Uchisaiwaicho district, but uncertainty is now growing over whether the plan can be realized as envisioned.

Further Cost Pressures Leave Little Room for Optimism

Resource prices have surged amid worsening Middle East tensions triggered by military conflict involving the United States, Israel and Iran. Further price increases appear unavoidable, particularly for petroleum-derived construction materials. Some materials, including insulation, are already facing tight supply and demand conditions.

The common thread across these projects is that higher construction costs are no longer a temporary inconvenience. They are beginning to reshape the scale, timing and viability of redevelopment itself. Unless rents, sale prices or construction costs move in a more favorable direction, more projects may be forced into delays, redesigns or outright cancellation.

Sources:

Nikkei Shimbun (Japanese only; paywalled)

Yahoo Japan News (Japanese only)