In July, a luxury hotel, Arcadia Resort Miyakojima, opened near a coral reef off Irabu Island, which is about 300 kilometers southwest of Okinawa's main island and part of the city of Miyakojima. Irabu Island is connected to Miyakojima by a newly constructed bridge.

All 14 rooms on the property are ocean-view suites that can accommodate up to eight people. The rooms go for 2.8 million yen (about $18,600) a night. Despite nightly charges of around 100,000 yen per person, even for cheaper packages, the rooms were almost fully booked over the summer.

This is quite a change for the island: Local residents used to say land on Irabu was worth next to nothing.

In recent years, a string of developments has turned the island into a resort area, lifting land prices. The building boom was triggered by the opening of the Irabu Ohashi Bridge back in 2015. Stretching 3.5 kilometers, it is Japan's longest toll-free bridge, allowing people to travel from Irabu to the city center on Miyakojima by car in 10 to 20 minutes.

Irabu Ohashi Bridge is the longest toll-free bridge in Japan. It has improved transport between the islands of Irabu and Miyakojima. (Photo by Shogo Kodama)

Scheduled and charter flights operate between Shimoji and Greater Tokyo, the western region of Kansai that includes Osaka, and various parts of Asia. In fiscal 2019, before the pandemic, the number of visitors to the island jumped to 1.06 million, two and a half times the number in fiscal 2014.

The resort construction boom has added fuel to skyrocketing land prices on Shimoji. Some investors are big domestic developers that have teamed up with well-known overseas hotel brands. Others are individuals drawn by the island's relatively low land prices, compared with other resort areas.

In 2019, a new terminal opened at Shimojishima Airport on the remote island of Shimoji, which is also part of the city of Miyakojima. The new terminal gives visitors from Japan and abroad better access to the island and has made it more attractive as a tourist destination.

The number of lodging facilities in the city of Miyakojima has risen to more than 450, an increase of 2.5 times over the 10 years through 2022. Land prices in the city have nearly doubled.

But at 38,100 yen ($251.60) per square meter, land prices in the city are still just a quarter of the national average and a little more than one-third the Okinawa prefectural average. "Even though prices are going up, I feel it is undervalued," said one hotel operator from outside the prefecture.

The strong demand from outside the prefecture has thrown a spotlight on a shortage of commercial real estate in Miyakojima. In mid-October, a representative from an automotive company based outside the prefecture visited a real estate agency in the city hoping to find a site where the company could operate. He came up empty. "Fifth visit in two months and still can't find a business site," he said impatiently. The agency had no new properties listed on its website. All the would-be renter could do was to ask the agency to contact him if a property that met his criteria opened up.

The real estate frenzy has also shackled local businesses. Paradise Plan, located in the city of Miyakojima, sells yukishio sea salt. It wants to expand but Choji Nishizato, the company's president, is anxious, saying, "Land prices have been driven up by speculation and it is difficult for us to invest." A lack of rental properties for employees is also squeezing the company. In the city center there are almost no vacant properties. "There is a chance to invest, but I can't get enough employees because of the housing shortage," said Nishizato who plans to set up a dormitory for employees next year.

According to the Okigin Economic Research Institute based in Naha, the capital of Okinawa prefecture, 99% of all rental properties in the city of Miyakojima were occupied in 2022. The tight rental market is partly driven by rising numbers of construction workers and employees of companies moving in from outside the island.

There are virtually no rental properties available in the city of Miyakojima as the island wrestles with an influx of construction and other workers, and the recovery of tourism following the pandemic. (Photo by Shogo Kodama)

The average rent for a newly built studio or two-room apartment is 63,400 yen. Although the average market price for rental properties in 2022 settled down to about 10,000 yen below the pre-COVID level in 2019, it is nearly 20,000 yen higher than in 2014. A couple in their 30s who moved from western Japan to Miyakojima to open a restaurant had a hard time finding a place to live. The real estate agent had only two properties on offer: a new one for 230,000 yen a month or a 40-year-old one for 60,000 yen. Neither met their needs so they moved into a property they found through an acquaintance that was a dozen years old and went for 65,000 yen a month.

The woman was stunned: "The rent was high. I also considered buying, but the properties for sale were also close to 50 million yen and I couldn't afford it. I didn't think it would be so hard to find an apartment."

The supply of apartments in the city remains tight. Many renters assume the lease of the previous occupant to ensure that they can find a place to live. At real estate agencies in Miyakojima, dozens of people are on waiting lists for rental properties, mostly people from outside the island. Prospective tenants are often asked to make an immediate decision when they are contacted, and in many cases they decide without actually seeing the apartment.

For landlords and investors in apartments, the market could hardly be better. A business owner living on Okinawa's main island built an apartment with about 20 two-room units in 2020 and has leased the entire building to a big construction company. The business owner gets a steady income from the property.

"The crystal clear Miyako Blue waters are attractive, and demand for land has risen as people bet on the future growth of Miyakojima, which was less developed than Ishigaki Island further south," said Takao Takeshima, president of Takechan Home, a real estate agency in Naha.

With the Irabu Ohashi Bridge and the new terminal at Shimojishima Airport offering good access to the resort islands, experts expect the investment spree to continue.

"Even amid the coronavirus crisis, real estate prices on Miyakojima did not fall. More and more business investment has poured in as people anticipate higher tourism demand once COVID-19 subsides. It appears that a new round of the real estate frenzy is about to begin," said Yoshiro Hamba, a property appraiser who serves as the Miyakojima branch manager of Osaka-based Oshima Real Estate Appraisal.

"The number of tourists visiting Miyakojima by air has exceeded the pre-pandemic level. Considering the gradual reopening of large cruise ships and the rise in inbound overseas travelers, coupled with the weak yen, land prices in Miyakojima are likely to remain on an upward trend for the time being," Hamba said.