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Lease Office Market Trends in Tokyo the second half of 2014 Japanese of this page

Post: Tuesday November 11, 2014

Demand in office relocation in Tokyo remain high this year. Companies looking to expand are leasing larger office spaces expecting an economic recovery and preparing for the Tokyo Olympics in 2020. With this trend the polarization of rental prices is becoming more evident in central Tokyo.

Much of the relocation demand is concentrated on large scale recently constructed buildings. This has resulted in vacancies in older and small to mid-sized buildings far from train stations. Reflecting this trend, rent prices continue to go up among existing large scale buildings whereas small to mid-sized buildings have lower occupancy rates. To increase their competitiveness, some of these properties are lowering their asking rents to factor in the rise of relocation costs.

Lease Office Market Trends in Tokyo - The second half of 2014

The average vacancy rate in the end of September for the 5 wards of central Tokyo (Chiyoda, Chuo, Minato, Shinjuku, and Shibuya) is 5.65%. This is a 2.25% decline from the same time in the previous year and is the lowest level seen since Feb.2009.

One reason is that a company with relocation plans in the near future have committed earlier due to the prediction of a continuous rise in office rents. Another reason is that vacancies of large spaces are getting less due to fewer buildings being completed, and this has concentrated more demand on the relatively newer existing buildings. 

As a result, the rental prices of existing office buildings are on an upward trend. The Office Rent Index, which is calculated from office rents (Feb.1985 = 100), shows 128.00 on existing office building in Tokyo as of the end of Sept. which is a 7.24 point rise from the same time the previous year. Major real estate companies are increasing their prices 10-20% for new tenants and also negotiating for higher rents with existing tenants upon renewals or re-contracting. Existing tenants also tend to have to accept price increases in this market mood.

Due to the high-level of office relocation demand, competition among business districts to attract leading companies is becoming more active. Tokyo Nihonbashi Tower is a new building under construction near the Nihonbashi Crossing, which is going to be completed in the spring of 2015. This 180M high building will be higher than the neighboring Coredo Nihonbashi and will be equipped with spacious open plan floor spaces allowing for flexible office layouts. Nihonbashi district is one of the business districts with many redevelopment projects. The completion of the Nihonbashi Mitsui Tower and Coredo Nihonbashi has increased the population of office workers. Traditionally this area was predominately financial institutions and pharmaceutical manufacturers, but recently new companies are starting to show an interest in this district as well. In the Shibuya district which attracts many IT-related companies, the average vacancy rate as of the end of Sept. shows 3.96% which is 1.68% decline from the same time in the previous year and is the lowest in the 5 wards of central Tokyo. In the Shinagawa district a new large-scale building is going to be completed near Shinagawa Station in 2015 and it should also attract much attention.

Office space demand remains high but rising construction costs have resulted in some delays in construction, and the forecast for the supply of new buildings during 2015-2017 in Tokyo remains minimal.

Factoring in the recent intense competition among large-scale new buildings and the slow demand among old small to mid-sized buildings; the office rent is forecasted to continue its moderate up-ward trend centering on the large scale existing buildings.

On another note, the 15.05 point decline from last year of the Office Rent Index for new office buildings have resulted due to the fact that many new buildings opened with full occupancy which results in fewer rental prices listed at an asking price from real estate agencies.

 

 

 

Research for Office Rent  2014/11/4 NIKKEI Newspaper

Area Group

 

Rent

1000Yen

/Tsubo

Rent in 20131000Yen

/Tsubo

Fluctuation (%)

Deposit

(1000Yen

/Tsubo)

Comments

Marunouchi,

Otemachi

New

4043

Little Vacancy,

Continuous rise of Rent

Exist.

2350

2060

-9

230600

Kasumigaseki,

Uchisaiwaicho

New

Little Vacancy,  Contract with higher rent

Exist.

1737

1537

4

170444

Yotsuya, Kojimachi,

Bancho

New

High relocation demand, little vacancy

Exist.

930

730

5

29360

Yaesu,

Kyobashi, Nihonbashi

New

2140

2643

-12

252480

Oversupply trend with various redevelopment projects

Exist.

1043

935

20

72516

Nihonbashi

-Honcho,

-Muromachi

New

2530

300360

Good in commercial facilities, Little Vacancy

Exist.

627

730

-11

48324

Ginza

New

30

Kabukiza Tower is full occupancy

Exist.

1037

1035

4

64444

Hachobori, Kayabacho

New

20

 

240

Lower rent than surrounding areas

Exist.

721

621

4

35250

Tsukiji,

Akashi-cho

New

 

Lower rent, but still many vacancies

Exist.

625

625

 

36300

Shinbashi, Nishi-shinbashi,

Toranomon, Shiodome

New

2240

2328

22

264480

Many properties with intense competition

Exist.

738

732

15

45456

Akasaka,

Aoyama

New

2535

3537

-17

300420

Rent rise among some buildings

Exist.

940

840

2

48480

Roppongi,

Azabu

New

3335

Little vacancy among large scale buildings

Exist.

742

742

 

28504

Shiba,

Mita,

Takanawa

New

1825

216300

Increased vacancy offers after many move-out

Exist.

730

730

34360

Shibaura,

Konan

New

1525

25

-20

180300

Little vacancy among existing buildings

Exist.

535

630

11

35420

Osaki,

Gotanda

New

2325

276300

Increased vacancy among existing buildings, High vacancy rate

Exist.

630

625

16

36360

Shibuya, Harajuku

New

Little vacancy near Shibuya Station, Rising rent

Exist.

1033

630

19

47396

1 Tsubo=3.3sqm

 

 

 

Tokyo Office Space 2 Edited 3

 

  

 

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