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Business trends

Japan Inc says goodbye downtown, hello suburbs in post-pandemic era

Central Tokyo sees largest vacancy rate increase in a decade

Businesses are shedding empty office space as employees continue to work from home. (Photo by Mamoru Yago)

TOKYO -- Corporations headquartered in Tokyo have started to cut down on empty office space as businesses prepare for the new normal in a post-pandemic world.

This trend has caused a stark reversal of historically low office vacancies in the capital's downtown area. Instead, employers have opened offices outside the city to bring work closer to home.

This has gone hand-in-hand with the rise of working vacations, as well as the introduction of workplaces specially redesigned for video conferencing.

Personal computer maker Lenovo Japan and affiliate NEC Personal Computers plan to shrink the size of their 6,000 sq. meter headquarters at the Akihabara UDX complex. With 90% of the staff now telecommuting, the company deemed that the quality of work has not been affected, paving the way for the smaller physical footprint.

Startups are shuttering office space as a cost-saving method to offset soured earnings. Enechange, which offers online electricity price comparisons, slashed the size of its headquarters by 40%.

Enechange has adopted work schedules that keep the staff's commute to the office to only once or twice a week. As a result, the company decided it did not need the extra space, leased in Tokyo's Otemachi business district.

Average vacancies in five central Tokyo districts stood at 1.97% at the end of June, according to the office broker Miki Shoji. The vacancy rate rose by 0.33 point from May, the largest jump since February 2010.

Businesses are not just cutting office space -- they are branching outside the city as well.

Nomura Real Estate Development plans to expand its network of shared satellite offices to 150 locations by fiscal 2027, or six times today's roster with a focus on the suburban area surrounding Tokyo.

About 470 companies have leased these offices, up from 270 businesses in February.

"There are many people who wish to work close to home who use [the shared offices] for the whole day," said a Nomura Real Estate Development representative. "The demand for decentralized offices will likely arise going forward as well."

The market for working vacations, where employees book stays in picturesque cities to get away from the daily grind, has increased as well. Airbnb reports that private lodging reservations in Japan have jumped 78% on the year for the week ended June 13.

The biggest drivers were areas within an 80 km drive from Tokyo. Those locations saw bookings surge 60%. Reservations lasting at least 28 nights grew by 57%, indicating that the lodgers are working while on their getaways.

Elsewhere, companies are redesigning offices to comply with social distancing demands. Cosmetics seller FANCL dispersed its call center staff, originally concentrated on a single floor, over five floors. That ensures each seat is two meters away from another.

Ajinomoto got rid of half its open office seating. The spice maker will later explore what to do with the extra space. At Takeda Pharmaceutical's global headquarters, 10-person capacity meeting rooms have been limited to two people since early June. Elevators have been capped to two people per ride.

Daiwa Securities plans to install at its headquarters dedicated booths for Zoom videoconferences. The brokerage will create secure spaces so that privileged information can be freely shared in online client meetings. About 20% to 30% of Daiwa employees work from home.

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