ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailPositive ArrowIcon PrintTitle ChevronIcon Twitter
Economy

Tokyo office rents still down 20% from pre-financial-crisis levels

Tokyo office rents have been slow to recover, despite strong demand.

TOKYO -- Office rents in central Tokyo remain about 20% below where they were before the 2008 financial crisis amid waning demand for pricey properties as foreign financial institutions move out of the city.

Asking rents in the capital's five central wards -- Chiyoda, Chuo, Minato, Shinjuku and Shibuya -- averaged 18,322 yen ($180) per 3.3 sq. meters in August, according to office brokerage Miki Shoji. The figure has gained for 32 months in a row. But the increase from July came to just 0.3% -- a small uptick, given that no new major office space became available last month.

The vacancy rate hit a roughly eight-year low at the end of August after falling 0.04 percentage point from a month earlier to 3.9%. Properties owned by major developers are nearly full. "Our buildings are more than 90%-occupied," said Kengo Fukui, an executive managing officer at Tokyo Tatemono.

Even though the vacancy rate has fallen by more than half since the recent high in 2012, rents have gained only about 10%.

Since the March 2011 earthquake and tsunami, tenants have flocked to new buildings that are quake-resistant or have other disaster preparation measures, pulling the average vacancy down. The JR Shinjuku Miraina Tower, which was completed in March, is almost fully occupied, while the Otemachi Financial City Grand Cube was full when it opened earlier this year. Demand is also strong for buildings with favorable locations.

But while the vacancy rate is now where it was before the financial crisis hit, average asking rents are still far lower. Many foreign financial institutions have moved their regional headquarters to Hong Kong since the crisis, weighing down demand for high-rent properties.

"Offices where highly paid people work, such as foreign financial institutions, tend to have higher rents," said Toyokazu Imazeki, chief analyst at Sanko Estate. Contract rents at A-class buildings -- built within the last 15 years, with at least 990 sq. meters of space on each level and a total floor area of at least 33,000 sq. meters -- are starting to decline after more than four years of gains, according to Sanko Estate and the NLI Research Institute.

Office space offerings tend to drop once contracts do. "Some companies will start considering a move with an eye on new properties to become available in 2018," said Yuto Ohigashi of JLL.

(Nikkei)

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Try 1 month for $0.99

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends January 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to Nikkei Asia has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media

Nikkei Asian Review, now known as Nikkei Asia, will be the voice of the Asian Century.

Celebrate our next chapter
Free access for everyone - Sep. 30

Find out more