A vacancy rate of 5% is said to be the line between a landlord’s market and a tenant’s market. According to Miki Shoji, the vacancy rate in Tokyo’s central five business districts in July 2015 was 4.89%, down 0.23 points from June and down 1.31 points from last year. Shibuya-ku has the lowest vacancy rate of 2.27%, down 1.82 points from last year. CBRE reported that the all-grade vacancy rate in July 2015 was 3.3% in the 5 wards and 3.6% across the 23 wards. During the mini-bubble in 2007, the vacancy rate across all wards dropped to just 1.2%, while monthly rents reached a peak of 52,350 Yen/Tsubo (15,863 Yen/sqm).
Marunouchi remains the prime office location, and Marunouchi’s landlord – Mitsubishi Estate – is currently enjoying a vacancy rate of just 1.8%.
With renewed confidence in the economy, vacancy rates have again improved, while office rents have increased to a current average of 33,600 Yen/Tsubo (10,181 Yen/sqm), up from 29,050 Yen/Tsubo (8,803 Yen/sqm) seen during the market bottom.
Demand from companies seeking to rent entire floors is thought to be a driving force behind the rising rents. Companies are starting to group divisions and departments into one building or one floor, rather than having various smaller office locations.
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