In December, office rents in central Tokyo saw the first month-on-month increase in 3.5 years. According to brokerage Miki Shoji, the average monthly rent per tsubo was 19,748 Yen (5,975 Yen/m2), up 22 Yen from the previous month and the first increase since July 2020.
Vacancies are shrinking in prime locations as companies seek to attract new employees by being in more appealing locations. Chiyoda’s vacancy rate dropped by 0.02 points from the previous month to 3.17%, and is at the lowest level since November 2020.
The vacancy rate in existing buildings was 5.32%, and 32.15% in brand-new construction.
A survey of tenant needs carried out by Mori Building between September and October found that 27% planned to lease new space, up 3 points from 2022 and the highest share since 2019. Of the respondents who plan to lease new space, 55% of them are looking to expand their floor space (in 2020 this share was just 33%). The top two reasons for seeking new office space were to [1] move to a building in a better location, and [2] move to a building with better facilities. 14% of respondents reported adjustments to the rents they were paying, with approximately two-thirds of those being rental increases.
Shibuya Sakura Stage, a large-scale mixed-use development on the southern side of Shibuya Station, was 95% leased at the time of the building’s completion in November, according to the Nikkei Shimbun. Some smaller office space in some of the buildings is currently advertised for between 30,000 ~ 36,000 Yen per tsubo.
Large neighborhood redevelopment projects can pull up market rents as companies seek to move there. The revitalization of the Shibuya Station area has seen average rents in December increase by 0.9% from the previous month.
Tokyo won’t see as much new office space added in 2024 with Mori Building estimating the supply in newly-constructed large-scale buildings in the 23 wards to be 730,000 m2, down 40% from 2023. This is likely to alleviate the downwards pressure on office rents. It isn’t good news for every district, with the waterfront districts in Minato and Chuo, and the older, inferior office buildings seeing vacancies increase.
Sources:
Miki Shoji, January 11, 2024.
Mori Building News Release, December 14, 2023.
The Nikkei Shimbun, January 12, 2024.
