Let’s take a look at Harumi’s office market as there are some noticeable vacancies this year.
Currently, there is almost 24,000 tsubo (79,320 m2 or 853,000 sq.ft) of vacant office space advertised for rent on the manmade island of Harumi in Tokyo Bay. Up to 13,000 tsubo is expected to be supplied in early 2024 with the completion of a new office tower in February.
In one office building completed in 2012, the main tenant recently moved out, leaving 14 of the 17 floors vacant, totaling over 9,700 tsubo or 96% of the net lettable area. The building was sold by a REIT in late 2022 for ¥39.11 billion (US$260 million at the time), with the seller citing the planned departure of the main tenant as the reason for the disposal. The cap rate at the time of sale was 3.9%.
In a neighboring building, the vacancy rate currently appears to be around 50%. And in the three office towers in Harumi Triton Square, a landmark project completed in 2001, there is a total of 10,000 tsubo (33,050 m2) of office space advertised for rent. In one of those buildings, the vacancy rate is around 20% with almost 7,500 tsubo (24,800 m2) of vacant office.
Typical asking rents for office on this island currently range from between 18,000 ~ 20,000 Yen/tsubo per month. Based on the REIT disposal report for the Harumi Front building, the building appeared to have been leased out for close to 10,000 Yen/tsubo.
When the REIT disposed of the Harumi Front building, it remarked on concerns of the supply-and-demand trend for offices in Harumi. One of the challenges for the island is its lack of a train station. The nearest subway is Kachidoki Station which is around an 8 ~ 10 minute walk to some of these office towers. In Tokyo, train access is key for office tenants. There is some light at the end of the tunnel, with the Tokyo metropolitan government announcing a plan for a new subway line running between Tokyo Station and Ariake and the Tokyo Big Sight Convention Center that would include a station on Harumi Island. Tentative estimates have the opening of the new line by 2040.
The situation in Harumi is not indicative of Tokyo’s office market as a whole. The vacancy rate for existing buildings across Tokyo’s five central business districts was 5.39% in September, according to brokerage Miki Shoji, down 0.25 percentage points from September 2022 and the lowest level seen in 31 months.
