Office vacancy rates down for second month

According to Miki Shoji, office building vacancy rates in Tokyo’s central 5 wards (Chiyoda, Chuo, Minato, Shinjuku, and Shibuya) fell 0.11 points at the end of March to 9.04%. This is the second continuous month where vacancy rates have fallen. However, the lower vacancy rates are not a sign of a market recovery but are due to falling office rents.

In March, three new office buildings were completed in central Tokyo, each with a floor area over 330 sqm. The total supply of office space from these new buildings is 82,500 sqm (887,700 sqft). One of the buildings has been occupied by an IT-related company who has rented the entire space. New tenancies in existing buildings has also decreased the supply by 20,000 sqm.

Average office rents continue to fall. In March, the average rent fell by 0.77% from the previous month to 16,716 Yen per Tsubo (5065 Yen per sqm). This is the 43rd month of continuous decline. As there are few companies looking to expand into larger spaces, building owners are forced to attract tenants by dropping rent.

This year, the supply of brand new office space is expected to reach 1,650,000 sqm (17,754,000 sqft) – twice the amount supplied in 2011. There is a possibility that vacancy rates will rise again as a result.

Source: The Nikkei Shimbun, April 5, 2012.

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