Tokyo’s prime office vacancy rate hit a new record low in February, dropping 0.04 points from the previous month to 1.49%. This is the lowest vacancy rate seen since December 1990 when it was as low as 0.39%.
Office vacancy rates have been in the 1% range since November 2018. For brand-new office buildings (built within the past year), the average vacancy rate was 3.95%, up 0.58 points from the previous month and up 0.78 points from last year. Otemachi One, a 40-story high-rise near Tokyo Station, was completed in February and is now fully leased. For existing buildings, the vacancy rate was 1.42%, down 0.06 points from January and down 0.33 points from last year.
The average advertised monthly office rent reached 22,548 Yen per tsubo (approx. 6,822 Yen per square meter), a 6.86% increase from last year. This is the 74th month in a row to record an increase.
Several brand-new, large-scale office buildings are expected to be supplied across Tokyo in 2020, including Mori Trust’s Kamiyamacho Trust Tower (Tokyo World Gate), and Daiwa House’s D Tower Nishi-Shinjuku. Brokerages report a high rate of tenant applications and little vacancies remaining.
Should the economic impact of the coronavirus continue to worsen, the effects may eventually be felt in the commercial real estate market. Generally speaking, a sudden economic decline is likely to take six to twelve months to be felt in the real estate market.
Sources:
Miki Shoji, March 12, 2020.
The Nikkei Shimbun, March 13, 2020.
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