Tokyo’s office vacancy rate worsened for the fifth month in a row in July as the commercial sector feels the pain of the coronavirus pandemic. According to office brokerage Miki Shoji, the office vacancy rate in Tokyo’s five business districts reached 2.77% in July, up 0.80 points from the previous month, and up 1.06 points from last year. This is the highest vacancy rate seen since March 2018 when it was 2.80%, and the highest monthly jump since the company began recording data in 2002.
Shibuya had the highest vacancy rate in the five districts, climbing 2.59 points from last year to 3.85% – the highest since October 2014. Large-scale office development projects around Shibuya Station in an effort to make it the tech hub of Japan have been hampered by ongoing lease cancellations.
Rents still remained strong, reaching the highest level in recent history and the 75th month in a row to see a year-on-year increase. There are signs that office rents are reaching their peak with some building landlords looking to reduce advertised rents in order to fill empty floors.
Tokyo’s office market had been on a winning streak since 2013 with corporations moving to more convenient, central locations, while also expanding their office footprint. Now, with an uncertain global economic outlook and a shift towards telework, companies are reassessing their office needs.
Sources:
Miki Shoji Office Report.
The Nikkei Shimbun, August 7, 2020.
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