The central Tokyo office building market is stagnating. At the end of November, the office vacancy rate for Tokyo’s central 5 wards (Chiyoda, Chuo, Minato, Shinjuku and Shibuya) reached 8.90%. This is the second continuous month with an increase in vacancy rates and the first time since April, 2011, that rates had reached this level. Meanwhile, the average office rent for central Tokyo has declined for the 39th continuous month.
With the Euro crisis and strong Yen, there is a deceleration in demand from tenants with many companies being more prudent and delaying moving. The demand for buildings with high disaster preparedness and earthquake resistance has slowed.
The office vacancy rates in Minato-ku reached 9.82% and Shinjuku-ku reached 9.38%. The vacancy rates for brand new office buildings in Tokyo increased 1.97 points to 22.32% in November. Between December and January, large-scale commercial buildings in Nishi-Shinjuku and Marunouchi are scheduled for completion, so the amount of vacant floorspace is expected to increase by a large degree.
The average advertised office rent for Tokyo’s 5 wards in November was 16,973 Yen/Tsubo*, or 5143 Yen/sqm (478 USD/sqft) per month, down 0.2% from the previous month. The percentage of buildings in the 5 wards with vacant space reached 51.41%, up 0.11 points from October. The number of places advertising free rent promotions is also increasing.
*1 Tsubo = 3.3 sqm or 35.5 sqft
Source: The Nikkei Shimbun, November 9, 2011.