A Google search for “Olympics abandoned buildings” brings up over 1.4 million results. Estimates for the 2016 Summer Olympics show that hosting the games cost Brazil as much as $13 billion, yet less than a year later, the site of the Olympic Park was abandoned, with weeds growing in between sections of concrete in the plaza.
This is just one example. There are structures in countries around the world that are quickly abandoned and fall into disrepair after hosting the Olympic Games.
The 2020 Summer Olympics are currently scheduled to be held in Tokyo this July and August, a year delayed from their original date due to the COVID-19 pandemic, which could cause the games to again be postponed or ultimately canceled.
Whether or not the games are held, Tokyo provides an interesting case study to examine how the Olympics can affect the real estate market. It has been seven and a half years since Tokyo was selected as the host city and 57 years since Tokyo last hosted the Summer Games in 1964. We can start to ask whether the games will be a waste of money for just a few weeks of celebration or whether sustainability could become a larger focus.
Been here before
In 2013, immediately after Tokyo was selected as a host city, the Japan Real Estate Institute (JREI) conducted a survey of investors titled “The impact of the decision to hold the Olympic Games on demand.” Most respondents agreed that demand would be limited to the area around the venue and Central Tokyo. In fact, no respondents believed that the games would affect demand in other prefectural capitals, and only 7% believed that they would affect demand in the central area outside of the Tokyo suburbs.
There are two reasons for this.
The first is that 30% of Japan’s population is already concentrated in the Tokyo metropolitan area, the largest metropolitan area in the world with 38.5 million people. This has been a remarkable trend since the mid-1990s; Tokyo has become so concentrated that there was very little room for the games to have any significant effect in the first place.
The other reason is that the 1964 Summer Games already resulted in a substantial development of infrastructure; thus, the typical strain that an upcoming Olympics hosting would place on the stock of public capital has already been reduced.
We see this in a comparison of expenses to gross domestic product (GDP). In 1964, the total amount spent on direct expenses related to the Olympics and infrastructure development was 1 trillion yen (approximately $9.18 billion). This amount is about four times higher in 2021 at 4.2 trillion yen ($38.59 billion), but nominal GDP is 12.6 times higher; Japan’s GDP in 1964 was 1.5 trillion yen ($13.78 billion) but is now 19 trillion yen ($174 billion). The actual relative impact of the Olympics has fallen by one-third, dropping from 67% of GDP to 22%.
Building on the past
The number of rental housing starts is also low compared to the high-growth period from the 1960s to 1970s and the prosperity of the bubble period in the 1980s. In fact, the number is unchanged from where it was at the time of the 1964 Olympics.
Considering that Japan’s population has increased from 97.8 million to 125.6 million, and that many houses in Japan have a short construction cycle and are designed to be rebuilt every 30 years, the decision to host the Olympics does not appear to have had a major influence on current rental housing starts.
On the other hand, several transportation infrastructure maintenance and connection issues have seen major progress. Access from international airports to the surrounding areas has improved, as have the connections from areas along Tokyo Bay (where piers, warehouses, and office districts are concentrated) to the suburbs (where residential areas and industrial parks are located). Chronic traffic congestion caused by bypass roads in the city center is also improving. This only serves to make the city a more attractive target for investment and is expected to remain a factor in driving further population concentration in the medium-to-long term.
There are many projects at the 2021 Olympic Games designed to leave a legacy for future generations.
Efforts have also been made to promote sustainability. The National Stadium was built on the site of a previous Olympic venue and incorporates a large amount of small-gauge timber frequently used in Japanese houses. Such prominent use and display of this wood has the added benefit of actually promoting forest conservation. The structure also relies on natural ventilation. The building was designed by renowned architect Kengo Kuma and is considered a successful implementation of sustainable development goals in a Japanese style.
Finally, the Village Plaza, one of the main facilities in the Olympic and Paralympic Village, was constructed from wood donated by 63 municipalities across Japan. The plaza will be taken down after the competition, and the wood will be returned to municipalities to be reused in various local structures commemorating the games.
What’s next for Tokyo
“The Olympic effect” clearly varies by host city. Studies show prices in London increased between 2.1% and 3.3% after the announcement that it would host the 2012 Games, and some properties close to Olympic sites increased by as much as 5%.
It also varies based on the timing of when the Olympic Games fall within the current cycle of the host city’s real estate market. Historically, cities with a growing market have enjoyed positive effects on prices due to hosting, while those with decreasing demand have been left with an oversupply.
The Tokyo Summer Olympics may reveal how truly unique Japan’s real estate market is, given the population growth that has occurred over the past 30 years.
The Olympics are meant to be a celebration of human spirit and international good will. Will hosting the Olympics in Tokyo leave a lasting legacy that yields long-term benefits, or will it leave behind the familiar bad taste of having committed massive sums of resources for just a few weeks of games, which, in the process, results in environmental degradation of the surrounding areas? As is often the case, this will also be determined largely by the sustainability efforts of Tokyo itself and the countless individuals who come together to produce such a historic event.