On October 2, 2026, the Nagoya City Transportation Bureau announced that it had selected AB Hotel Co., Ltd. (Anjo City, Aichi; securities code 6565) as the prospective lessee of the former Meijo Depot site (Sannomaru 4-chome, Naka Ward), which once served as the rolling-stock depot for the Meijo subway line. The proposal is a nine-story mixed-use complex of about 4,802㎡ in total floor area, combining a 179-room hotel with food and beverage outlets. The fixed-term business land lease runs for 49 years and 11 months at an annual rent of ¥66 million (non-taxable). Design and construction are slated to start in 2027, with opening targeted for 2029. In this article we compare what this ground rent costs per room against the alternative of buying the land, take a property-by-property inventory of the room stock within 1km of Sannomaru, estimate the required ADR from Naka Ward’s estimated settled ADR, and then test whether a government-district location has lodging demand, using employment, residential population and day-of-week occupancy data.

Executive Summary — Ground Rent of About ¥1,000 per Room per Day, Required ADR of ¥14,000–¥16,000

To state the conclusion first: dividing the ¥66 million annual ground rent by 179 rooms gives ¥369,000 per room per year, or about ¥1,010 per day, and in the base case described below it amounts to only about 8% of revenue. Compared with buying the land, valuing the site at surrounding official land price levels (¥250,000–¥850,000/㎡) yields an acquisition cost of ¥1.1–3.9 billion, and the cumulative rent over 49 years and 11 months (¥3.29 billion nominal) falls in the middle of that range. On the other hand, there are only 5 lodging properties with 603 rooms within 1km of Sannomaru, so the new 179 rooms would raise local stock by roughly 30%. Naka Ward’s estimated settled ADR averages ¥10,200 over 12 months (¥9,600 excluding September 2026, when the Asian Games were held), and the ¥14,000–¥16,000 ADR needed for an 8% yield is above that. However, AB Hotel Nagoya Sakae, which the company has operated since 2013, has a 12-month average estimated settled ADR of ¥16,000 — already more than 50% above the Naka Ward median — suggesting that the company’s format of limited-service hotels with large public baths and breakfast is earning pricing support in central Nagoya.

Tender Results and Lease Terms — Only 104% of the 200% FAR Used, Building Footprint 13% of the Site

First, a recap of the tender process. The Nagoya City Transportation Bureau published its “Call for Proposals for Use of the Former Meijo Depot Site” on April 27, 2026, accepted participation applications from May 1 to June 11, and received proposal documents from June 26 to August 3. Following hearings on September 15, a five-member evaluation committee (a real estate appraiser, two university professors, a lawyer and a tax accountant) summed the scores for the “project proposal” and the “proposed rent,” and selected the highest-scoring bidder as the prospective lessee. The Bureau set two goals for the tender — “maximizing returns from effective use of its assets” and “contributing to vibrancy around Nagoya Castle” — so, in typical public-land fashion, the scoring covered not only the rent but also the spillover benefits to the neighborhood. A basic agreement is expected to be signed around November 2026.

Source: Compiled by HotelBank Editorial Team from Nagoya City Transportation Bureau, “Call for Proposals for Use of the Former Meijo Depot Site” and “Selection of the Prospective Lessee of the Former Meijo Depot Site”; Kensetsu Tsushin Shimbun; Chunichi Shimbun

Setting the proposal against the site conditions reveals the plan’s headroom. On a site with a 200% floor area ratio, 4,802㎡ of total floor area is about 104% of the site area — in other words, the plan uses only about half of the permitted volume. The 582㎡ building footprint is about 13% of the site, well below the 2,759㎡ cap implied by 60% building coverage. The layout appears to stack the building into a nine-story tower and devote the rest of the site to parking, landscaping and public gathering space. Category 2 Residential Zones tend to face tighter height and shadow restrictions than commercial zones, and with the surrounding area low-rise — sandwiched between Nagoya Castle and the government district — nine stories can be read as a height chosen with the surroundings in mind. The site was originally the rolling-stock depot for the Meijo subway line.

Ground Rent per Room — Compared with Buying the Land

Dividing ¥66 million a year by 179 rooms gives ¥369,000 per room per year, or about ¥1,010 per day. Per unit of site area, that is roughly ¥14,400/㎡ per year. Summed over the 49-year-11-month term, the nominal total reaches ¥3.29 billion — the total price of “renting rather than buying” the land. So what would it cost to acquire the same site? Picking benchmark sites within 1.1km of the subject from the 2026 official land price and prefectural land price surveys in the MLIT Real Estate Information Library: Shimizu 3-chome in a Category 1 Residential Zone was ¥254,000/㎡ (+2.4% YoY, about 740m from the site); Shirakabe 3-chome in a commercial zone was ¥490,000/㎡ (+3.8%); and Shirakabe 4-chome, in the same Category 2 Residential Zone as the subject, was ¥845,000/㎡ (+5.6%). Because the site itself has no official price point, the table below values the 4,597.87㎡ site at these three levels.

Source: HotelBank Editorial Team estimates based on MLIT Real Estate Information Library (2026 official land prices). The site has no official price point; reference values apply unit prices of surrounding benchmark sites mechanically

The ground-rent yield falls in a range of 1.7–5.7%. Ground rent equal to a few percent of land value is common for fixed-term business land leases on public land, and from the lessee’s perspective it secures a business period of nearly 50 years while avoiding the upfront cost of acquisition. On a per-room basis, it replaces a land cost of ¥6.42–21.83 million that would otherwise be added to construction cost with ground rent of ¥369,000 a year. Cumulative rent of ¥3.29 billion falls short of the ¥3.91 billion acquisition cost at the Shirakabe 4-chome level, but well exceeds the ¥1.15 billion at the Shimizu 3-chome level. In other words, the break-even between rent and acquisition cost is about ¥716,000/㎡: if the site were valued at the Shirakabe 4-chome level (¥845,000/㎡), above that threshold, leasing would be cheaper; at the Shimizu 3-chome or Shirakabe 3-chome levels (¥254,000–¥490,000/㎡), buying would be cheaper in nominal terms. Since selling public land is not an option to begin with, this comparison should be read as a gauge of whether the lease terms are in line with the market.

Room Stock Inventory Within 1km of Sannomaru — 5 Properties, 603 Rooms; New 179 Rooms Add +30%

Next, we count supply in the catchment property by property. We extracted lodging properties within a 2km radius of the site via geographic search and kept as active only those with price observations on major booking sites in July–September 2026. Duplicate listings — such as the closed former Hotel Nagoya Castle (on whose site Espacio Nagoya Castle opened in October 2025) and rebranded properties — were consolidated, and capsule hotels, private rentals and simple lodgings were excluded because their rooms differ in nature. The result: active stock within 2km totals 67 properties with 12,476 rooms. Most of it, however, is concentrated 1.5km or more away in Nishiki, Sakae and Fushimi; within 1km of the site there are only 5 properties with 603 rooms.

Source: MetroEngines Research & Consulting (properties with price observations in July–September 2026, N=67 properties)

The breakdown within 1km is shown in the table below; public-sector lodgings and the Castle-branded hotels on the west side of Nagoya Castle dominate. Limited-service business hotels are limited to two properties — Kuretake Inn Nagoya Hisaya-odori (217 rooms) and Hotel Androoms Nagoya Sakae (108 rooms) — both at the southern edge toward Hisaya-odori. There are no lodging properties within the Sannomaru government district itself. The new 179 rooms would add 30% to stock within 1km — a noticeable presence in the catchment — but only 1.4% to the 2km area as a whole.

Source: MetroEngines Research & Consulting (properties within 1km with price observations in July–September 2026)

Source: MetroEngines Research & Consulting; MLIT Real Estate Information Library (station ridership, FY2023). Circle size = room count; blue = site, navy = within 1km, gray = 1–2km

Within 2km, three planned openings totaling 287 rooms could be confirmed from listings, all on the Nishiki / Sakae / Marunouchi side. Conrad Nagoya (170 rooms) also opened in Nishiki, Naka Ward, in June 2026, so supply in Sakae is thickening in both the upper tier and the limited-service segment. North of Sannomaru, by contrast, Nagoya Castle, the government district and residential neighborhoods continue, and no planned openings can be identified within 1km. This is a location that should be considered separately from the Sakae/Nishiki market in terms of both guest mix and price range.

Source: MetroEngines Research & Consulting (based on confirmed OTA listings, N=3 properties). Listings appear several months before opening, so the count may increase as new listings appear

Naka Ward ADR and Required ADR — Against a 12-Month Average of ¥10,200, an 8% Yield Needs ¥14,000–¥16,000

Naka Ward’s estimated settled ADR averaged ¥10,200 over the 12 months from October 2025 to September 2026 (87–89 properties). September 2026 jumped to ¥16,900 because of the Asian Games, but that is a one-off factor; the 11-month average excluding September is ¥9,600. Year on year, June 2026 was -0.2%, July -7.3% and August -11.0%, so the summer months ran below the prior year. Narrowing to business hotels gives a 12-month average of ¥10,100 (75–77 properties), or ¥9,500 excluding September — almost the same as the overall figure. The 12-month average for Aichi Prefecture as a whole is ¥9,100, so Naka Ward runs a little over 10% above the prefectural average.

Here it is worth checking where the company’s existing hotels stand in Nagoya. AB Hotel Nagoya Sakae (130 rooms), opened in 2013, has a 12-month average estimated settled ADR of ¥16,000 — ¥15,700 even excluding September — more than 50% above the Naka Ward median. Its other existing hotels in Aichi — Ichinomiya, Komaki, Okazaki and Tokai Otagawa — also sit in a ¥12,000–¥17,000 band, with most above the prefectural average of ¥9,100. According to the company’s annual securities report (fiscal year ended March 2026), every hotel has a large public bath and offers free breakfast (paid at some locations); the average occupancy of its 34 existing hotels was 84.7%, and its operating margin reached 39.8%. The report also states a policy of opening only in business-demand locations near stations and major expressway interchanges, while avoiding tourism-dependent areas to limit seasonal swings. Sannomaru can be seen as an application of these site criteria to a government district.

Source: MetroEngines Research & Consulting (October 2025–September 2026, average of each property’s monthly estimates)

Now to the required-ADR estimate. The 4,802㎡ total floor area equals about 1,453 tsubo; applying 2025 construction cost levels (¥2.026 million/tsubo for reinforced concrete, ¥2.405 million/tsubo for steel frame) gives a construction cost of ¥2.94–3.49 billion. With construction starting in 2027 and the midpoint of works placed in the first half of 2028, we assume construction costs keep rising at around 5% a year (our assumption) and build in an increase of roughly 13% versus 2025, giving ¥3.33–3.95 billion, or ¥18.59–22.06 million per room. Adding FF&E (furniture, fixtures and equipment) at ¥1.5 million per room, we set total investment at ¥3.60–4.22 billion. Because the land is leased there is no acquisition cost; instead, the ¥66 million annual ground rent is charged to operating expenses. Occupancy is set at 85%, close to the company’s existing-hotel track record, and the GOP margin at 45% as our assumption (a general industry GOP margin is said to have “around 30–40% as one benchmark” (Relo Hotel Solutions), so 45% is an assumption above that).

Source: HotelBank Editorial Team estimates (total investment ¥3.60–4.22 billion, GOP margin 45%, ground rent ¥66 million/year). Construction costs from MLIT Building Construction Statistics and archi-book 2025 edition; escalation rate is our assumption (around 5% a year)

The required ADR for an 8% yield is ¥14,200–¥16,100. That is 40–60% above Naka Ward’s 12-month average of ¥10,200, but AB Hotel Nagoya Sakae’s actual ¥16,000 is close to the top of this band. In other words, if the company can replicate in Sannomaru the rates its existing hotel commands in Sakae, a yield of around 8% comes within reach even at post-escalation construction costs. If a 6% yield is deemed sufficient, the required ADR falls to ¥11,300–¥12,800, approaching the normal-month level for Naka Ward business hotels. Checking the sensitivity: in the base case of ¥15,000 ADR and 85% annual OCC (total investment ¥3.91 billion), the yield is 7.9%; a 10% drop in ADR brings it to 6.9%, a 5-point drop in OCC to 7.3%, and both together to 6.4%. Ground rent is 7.9% of revenue, so its weight as a fixed cost is limited.

Source: HotelBank Editorial Team estimates. This is a simplified estimate; actual investment decisions require a detailed feasibility study

The next table extends the sensitivity to two axes. We varied ADR from ¥13,000 to ¥17,000 and annual OCC from 70% to 90%, holding total investment at ¥3.91 billion, GOP margin at 45% and ground rent at ¥66 million to calculate the yield. An 8% yield is reached with ADR of about ¥15,200 or more at 85% annual OCC, about ¥16,100 or more at 80%, and about ¥14,300 or more at 90%. Plugging in AB Hotel Nagoya Sakae’s estimated settled ADR of ¥16,000 gives 7.9% at 80% annual OCC and 8.5% at 85%, so the 8% threshold hinges on whether the hotel can secure occupancy close to the 84.7% average of the company’s 34 existing hotels (fiscal year ended March 2026).

Source: HotelBank Editorial Team estimates (revenue is room revenue only · 179 rooms × 365 days. Bold = yield of 8% or more; outlined = base case). This is a simplified estimate; actual investment decisions require a detailed feasibility study

On the positioning map, the median within 2km is ¥8,600, and properties are densely packed below ¥10,000. The ¥12,000–¥17,000 band is occupied mainly by properties that add value through large baths or breakfast — such as Nishitetsu Hotel Croom Nagoya, Dormy Inn PREMIUM Nagoya Sakae and Grace Inn Nagoya — and the required ADR band for the new 179 rooms overlaps this “value-added limited-service” zone. Within 1km, Hotel Androoms Nagoya Sakae falls into this band at ¥12,600, indicating that limited-service hotels with design appeal or large baths have room to be accepted on price in Sannomaru as well.

Is There Lodging Demand in a Government District? — 37,000 Workers, 2.38 Million Castle Visitors, 86–91% Occupancy Tue–Fri

Finally, we check the location’s demand structure with numbers. Within a 1km radius of the site there are 3,225 private-sector establishments with 37,395 employees, of which office-type businesses account for 29.5% (Economic Census 2021). Note that the Economic Census does not cover national or local government offices, so the civil servants concentrated in Sannomaru — at the prefectural government, City Hall, courts and so on — are not included. Actual employment can be assumed to be higher. For rail access, Nagoya-jo Station on the Meijo Line (about 280m from the site) handles 42,618 passengers a day (FY2023), Higashi-Ote Station on the Meitetsu Seto Line (about 190m) 4,415, and Meijo-koen Station (about 650m) 12,302; Sakae is two stops away on the Meijo Line.

The residential population within 1km is 21,934 (2025), with a working-age share of 68.5% and an elderly share of 20.1%, and it is projected to edge up to 22,162 (+3.4%) by 2040. For a city-center area, the population is not declining, and the catchment includes residential neighborhoods east of Nagoya Castle such as Shirakabe. Residents are not direct lodging demand for a hotel, but in this plan — which opens the large bath and gym to non-guests — everyday use by local residents becomes a factor underpinning the base level of utilization.

Source: MLIT National Land Numerical Information (future population projections by 250m mesh, FY2024 MLIT National Policy Bureau estimates). Residential population (census-based), not visitor or transit population

On the tourism side, Nagoya Castle recorded 2,387,217 visitors in FY2025 (of which 664,833 were foreign visitors), the second-highest ever after FY1989, the year of the World Design Exposition. That is an increase of 150,000 from 2,234,976 in the previous fiscal year, and visitors have exceeded 2 million for three consecutive years since FY2023. Aichi Prefecture’s total guest nights in 2025 were 22.75 million (+6.7% YoY), of which foreign guests accounted for 4.86 million (+24.4%), and room occupancy was 75.4% for business hotels (11th nationwide) and 69.2% overall (4th nationwide) (Japan Tourism Agency, Overnight Travel Statistics Survey, 2025 annual figures).

So is lodging demand in the government district weekday-driven? Averaging the estimated OCC of Naka Ward business hotels (based on OTA listed inventory; 44–46 properties, 8,362–8,550 rooms) by day of week over the normal months of June–August 2026 (see also our day-of-week analysis of Aichi business hotels in September), Thursday is highest at 91.1%, followed by Wednesday at 89.2%, Friday 88.6%, Saturday 88.0% and Tuesday 86.3%, with troughs on Monday at 78.4% and Sunday at 74.1%. Tuesday through Saturday is flat at 86–91%, while only Sunday and Monday are more than 10 points lower — an urban-type curve on which both business-travel demand and weekend leisure demand ride. Sannomaru is a location closer to the business-travel side, and in addition to the weekday corporate guests that are the company’s strength, weekend demand from Nagoya Castle tourism and night-time economy generated by opening the large bath, gym and dining to the public are candidates to fill the Sunday–Monday trough.

Conclusion — Conditions for Public-Land Leasehold × Limited-Service Hotels to Work

To sum up, the viability of the former Meijo Depot project rests on lease terms of “zero acquisition cost and ground rent of about 8% of revenue” and thin supply of “only 603 rooms within 1km” — and on whether the company can replicate in the government district the roughly ¥15,000 rates its existing hotel achieves in Sakae. The required ADR of ¥14,000–¥16,000 (8% yield) is above the Naka Ward median, but the fact that limited-service hotels with large baths and breakfast form a ¥12,000–¥17,000 band within 2km is circumstantial evidence of demand at this price point. The proposal to open the large bath and gym under a night-time economy banner can be seen as a design that turns the government district’s thin night-time population to its advantage, seeking revenue from both local residents and business travelers.

Source: Compiled by HotelBank Editorial Team

Opening is three years away in 2029, and the assumptions will shift with construction costs, interest rates and supply trends in central Nagoya. Still, the fact that ¥66 million a year in ground rent comes to roughly ¥1,000 per room per day will not change, and this project shows once again that fixed-term business land leases on public land are a framework well suited to limited-service hotel development. Even within public-land utilization, it differs from the project in which Conrad Kobe will occupy the upper floors of Kobe City Hall Building No. 2 — both in what is being leased (floor space vs. land) and in price tier. Reading the two side by side outlines which of limited-service hotels and upscale brands find it easier to bid when municipalities lease land or floor space on condition of creating “vibrancy.”