Shibuya’s Silicon Valley status pushing rents to new highs

Thanks to its fast-growing status as Japan’s new tech center, Shibuya has outpaced Chiyoda as the most expensive office district in Tokyo. 

In the Shibuya Hikarie building, office space can rent for around 15,130 Yen/sqm per month (50,000 Yen per tsubo or US$13 per square foot), about double the average for the Shibuya district. Built in 2012, this 34-story office tower is home to the headquarters of e-commerce and mobile giant DeNA. When an empty floor becomes available in this landmark building, it is quickly filled.

Next month, the 47-story, 230-meter tall Shibuya Scramble East building will be completed just atop Shibuya Station. Anchor tenants will include CyberAgent and mixi.

Perhaps the most notable move will be the return of Google to Shibuya. Google Japan will be leasing the entire 50,000 sqm (538,000 square feet) of office space in the recently-built Shibuya Stream building, leaving behind their nine-year home in Roppongi Hills. Between 2001 and 2010, Google was headquartered in the 41-story Cerulean Tower building, also in Shibuya.

According to office brokerage Miki Shoji, the average monthly office rent in Shibuya’s business district was 7,445 Yen per square meter (24,607 Yen per tsubo or US$21 per square foot) in September. This is a 12% increase over the past year. It is also the most expensive of Tokyo’s five central business districts, exceeding the average rent in the historically expensive Chiyoda ward by 2.7%. Over the same period, Chiyoda has only seen office rents increase by around 3%.

The prime areas of Marunouchi and Otemachi still retain high office rents with Sanko Estate reporting that the average monthly rent in September for large-scale floor plates was around 12,670 Yen per square meter (41,838 Yen per Tsubo or US$11 per square foot). This exceeds the average of 10,110 Yen per square meter (33,417 Yen per Tsubo or US$8 per square foot) for the Shibuya-Dogenzaka district.

The scarcity of prime office space in Shibuya is helping to pull up rents. Chiyoda ward had 76 large-scale buildings advertising for tenants in September, while Shibuya had just 21. Over the past two years, a total of 80,000 square meters (860,000 square feet) of new office space has been supplied in Shibuya. Chiyoda, meanwhile, has seen 660,000 square meters (7.1 million square feet) of new office space. The average office vacancy rate in Shibuya was sitting at 1.51% in September, while Chiyoda’s was 1.28%. 

As more and more tech companies converge around Shibuya Station, it is also expected to put upward pressure on residential demand as more and more employees will be looking for housing within a reasonable commute of this station. 

Source: The Nikkei Shimbun, October 19, 2019.

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