Tokyo's compact office market sees some record high rents
How are office rents doing for the compact sector of the office market? According to the latest biannual report by AtHome, the market seems fine. Overall, rents in Tokyo were relatively flat in the first half of 2023 but several areas saw rents hit 10-year highs. Read more
Expected yields on Japanese real estate remain at historic lows
Despite the turmoil happening in some overseas commercial real estate sectors, investors in Japanese real estate continue to anticipate record-low yields. That may be due in part to low interest rates which make it one of the few places with a positive yield spread over government bonds. The latest investor survey by the Japan Real Estate Institute in April shows expected yields have either remained the same or dropped, depending on the asset class and location.Read more
Tokyo office vacancy rates expected to stabilize at the 6% range
According to a report by Mitsubishi UFJ Trust and Banking Corporation, the office vacancy rate in Tokyo is expected to remain around the 6% range for the next five years. Rents are expected to bottom out in 2024, followed by a mild increase.Read more
Omotesando office/retail buildings sold to domestic buyer
Two buildings alongside Omotesando’s Kotto-dori Street have been sold to a Kobe-based realtor.Read more
Tokyo's office vacancy rate improves 0.3 points in April
Tokyo’s office vacancy rate in April was 6.11%, a 0.3 point improvement from the previous month and a 0.27 point improvement from last year. The office leasing market is showing signs of recovery, and some companies are seeking to expand their office space.Read more
Tokyo's annual office supply forecast for 2023 - 2026
With the completion of several large-scale office buildings later this year, the total supply of new office space to hit the market in 2023 is going to be more than double what it was in 2022.
XYMAX Corporation’s research institute is forecasting a supply of 224,000 tsubo (740,000 sqm or 7.9 million sq.ft) of new office space this year. It is still below the peak of 275,000 tsubo supplied in 2020.
Between now and 2026, 75% of the office supply will centered in Chiyoda, Chuo and Minato, aka central Tokyo’s 3 wards. Adding in Shinjuku and Shibuya brings the total share to 86%. The average annual supply over the past 10 years has been around 159,000 tsubo. It is expected to drop to an average of 158,000 tsubo from 2023 to 2026.
Work styles have changed since the onset of the pandemic, and tenants are now favoring buildings that offer a variety of amenities, such as communal lounges and private booths for online meetings. These features are typically not found in older office buildings. Landlords are also mixing up the floor sizes on offer by splitting up some floors to attract small-to-mid sized corporate tenants.
And while the odds of completely leasing out a new building prior to completion may be lower, developers are taking this into account and allowing more time to fill their buildings with the right mix of tenants.
The phenomenon of secondary vacancies, where older buildings see increasing vacancies as the tenants move into newer ones, is starting to become apparent outside of the central 5 wards, with a growing divide between the high-demand buildings in prime locations, and the older, hard-to-fill buildings in second-tier locations.
Sources:
The Tokyo Shimbun, March 14, 2023.
Xymax, January 18, 2023.
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