An oversupply of high-quality office space across Tokyo and particularly in its central business districts has seen businesses taking the opportunity to renegotiate their rental arrangement in recent months, according to a new study from Miki Shoji.
The research firm reports that the average rent per square foot of office space in Tokyo’s five central zones had fallen by as much as 7.34 per cent between the end of 2009 and the end of 2010.
And the situation looks set to get more favourable for companies looking for commercial space in the Japanese capital, with several new buildings and hundreds of thousands of square feet of office space set to be made available over the coming 12 months.
“It is widely expected to take time for the market to bottom out,” a spokesperson for Miki Shoji made clear.
Overall vacancy rates in Tokyo fell slightly over the course of last month but there is around 0.82 per cent more unoccupied office space in across the city now than was the case a year ago.
All of this means development owners in Tokyo will be working hard to attract occupiers in months to come.
Over in Hong Kong by contrast, recent reports suggest that demand for office space is such that even some of the world’s leading finance companies are considering the option of occupying less expensive buildings outside the city’s main business district.
Editor’s notes: In the first quarter of 2023, considering the wider global uncertainties, office rental rate contraction was relatively gentle over the quarter, and vacancy rates were low, too.
The average Grade A office rents in Tokyo’s Central 5 Wards (C5W) of Minato Ward, Shibuya Ward, Chiyoda Ward, Shinjuku Ward and Chuo Ward decreased by 0.7% compared to Q4 2022 to JPY32,549 per tsubo* per month, falling 2.2% year-on-year.
The average Grade A office space vacancy rate in the C5W reduced by 0.9% quarter-on-quarter but increased by 0.3% year-on-year to 3%.
Comparing vacancy rates, Hong Kong which has also experienced its own unique issues over the past 3 years including civil unrest, the vacancy rate for grade A offices fell 0.2% month-on-month in March 2023 to 12%.
* a tsubo is the equivalent of 3.306 square metres or 35.585 square feet.