Year-on-year increase in Tokyo office rent for first time since 2008

Iidabashi Grand Bloom
Iidabashi Grand Bloom (left) and Park Court Chiyoda Fujimi The Tower (right)

According to Miki Shoji’s Office Report, the average office rent in Tokyo’s central five business areas (Chiyoda, Chuo, Minato, Shinjuku and Shibuya) in May had increased by 0.21% from 12 months prior. This is the first time since December 2008 that office rents had seen a year-on-year increase. It is also the fifth month in a row to see a month-on-month increase, indicating a turnaround in market conditions.

Landlord, Mitsubishi Jisho, have already hiked up the rent for some existing office tenants by 5 ~ 10%, and new tenants are being faced with rents that are 10 ~ 20% higher than they were in 2012. Office vacancy rates in central Tokyo declined for the 11th month in a row. In May, the average vacancy rate was 6.52%, down 0.12 points from the previous month and down 1.81 points from last year.

Vacancy rates by area:

  • Chiyoda-ku: 5.29% (+0.06 points from the previous month; -1.04 points from May 2013)
  • Chuo-ku: 6.50% (-0.46 points; -1.80 points)
  • Minato-ku: 8.23% (+0.02 points; -1.99 points)
  • Shinjuku-ku: 6.81% (-0.29 points; -3.55 points)
  • Shibuya-ku: 4.07% (-0.36 points; -1.16 points)
Kioicho Project
The Kioicho Project in Chiyoda-ku

IT companies are actively hiring new staff and seeking larger office spaces in convenient locations. On June 19, Yahoo Japan announced that they will be relocating their head office from Tokyo Midtown to the Kioicho Project (the redevelopment of the Grand Prince Hotel Akasaka) when the building opens in 2016. The redevelopment project includes a 36-storey mixed-use tower which will include the new hotel. Yahoo plan to occupy 20 of the 24 office floors.

Demand is strongest for buildings with the latest in earthquake-resistant construction and emergency supplies. The recently completed Iidabashi Grand Bloom has 72-hour back up power generators, a water filtration system and a well which can provide drinking water in a disaster. Mori Building’s Toranomon Hills, which officially opened this month, also has a back-up power supply and emergency supplies. Both office buildings are almost entirely occupied.

Sources:
J Cast, June 20, 2014.
Miki Shoji Office Report, June 13, 2014.
Nikkei Business, June 19, 2014.

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