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  • Vacancy Rates Decline as Range of Demand Increases Nationwide; Rents Rising Primarily Among Large Buildings in Select Areas

Vacancy Rates Decline as Range of Demand Increases Nationwide; Rents Rising Primarily Among Large Buildings in Select Areas

January 16, 2013
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CBRE releases Q4 2012 data on office building market trends for 13 cities nationwide

2013/01/16 

CBRE today released data on office building market trends for 13 major cities nationwide for Q4 2012.

Noteworthy Trends

  • Tokyo’s Grade A vacancy rates decreased to 8.8%, remaining flat at 7.5% for the 23 wards.
  • Grade A vacancy rates in Osaka fell significantly to 8.7%, while Nagoya’s Grade A vacancy rate of 1.8% reflected tight supply.
  • Nationwide vacancy rates continue to decline with tenants keen to relocate and demand increasing in a wide range of areas.
  • Scattered cases of rents rising centering on large buildings in select areas of Tokyo and Osaka, and in some regional cities.

Tokyo’s 23 Wards

The Grade A vacancy rates in Tokyo fell 0.5 points quarter-on-quarter to 8.8% as one Grade A building was completed in the fourth quarter at almost full occupancy. Assumed achievable rents were flat at 29,800yen per tsubo, down just 100yen quarter-on-quarter. With large-scale relocations easing in Tokyo’s 23 wards, the vacancy rate remained unchanged at 7.5%. Mid-sized and smaller relocations drove demand. Inquiries in the fourth quarter were healthy, with demand increasing at mid-sized buildings. Tenants were looking for larger spaces with improved locations and quality.
“As rents at some well-located prime buildings are starting to rise, the market is looking favorably at the improved economic impact of the new government subsequent to the elections in December. At times like these we often see a gap in attitude between owners and tenants on rent increases, and by the end of this year rents may jump if tenants start competing for space,” said Yoshihiro Watanabe, Executive Managing Director of Office Brokerage Services at CBRE.

Osaka

The vacancy rate for Grade A buildings in Osaka dropped 2.9 points from the previous quarter to 8.7% as a landmark Grade A building was completed this quarter with high occupancy. The vacancy rate of Osaka dropped for the fifth consecutive quarter to 9.4%, down 0.4 points quarter-on-quarter. Relocations from tenant-owned buildings and other trends implying an increase in demand continued pushing the vacancy rate down with demand concentrated at high-specification buildings with the latest earthquake resistance standards. Assumed achievable rent at Grade A buildings increase marginally to 18,900yen per tsubo, an increase of 200yen over the previous quarter.
“Inquiries have increased for a large-scale project that is expected to be completed next quarter,” said Takashi Katono, Head of the CBRE Kansai Regional Office. “While the retail zones are fully pre-leased, the office is attracting tenants from owner-occupied buildings and large buildings in the surrounding area. Vacancies could go up temporarily but we expect demand to be strong going forward.”

Nagoya

In Nagoya, supply has tightened with no new Grade A buildings coming online in the last three years. This pushed the Grade A vacancy rate down by 0.9 points quarter-on-quarter to 1.8%. The assumed achievable rent was virtually unchanged at 22,200yen per tsubo, an increase of 50yen from the previous quarter. The situation is expected to continue, reflecting the scarcity of Grade A space in the market. Nagoya’s city-wide vacancy rate has declined for ten consecutive quarters, with the vacancy rate declining a mere 0.1 points quarter-on-quarter to 11.3%. Tenants are increasingly looking to expand with demand concentrated around the Nagoya Station area, where supply is tight and lacks the availability of large contiguous spaces in prime buildings.
“Since there is going to be virtually no new supply in Nagoya in the next two years, the vacancy rate is expected to continue declining,” said CBRE Nagoya Office Senior Director Noriyuki Tsutsui. “Recently, we’ve seen an increase in inquiries related to business continuity measures from Nagoya branch offices of companies with nationwide operations. As the vacancy rate declines, we can expect an increase in demand at office buildings outside of the Nagoya Station area, as the area around the station does not have enough supply to meet tenant needs.”

Nationwide

Vacancy rates are mostly declining throughout Japan, as companies are keen to relocate. There is an increasing trend for relocations to larger offices, due to companies expanding or upgrading their office space. However prime buildings that meet tenant needs are becoming scarce in many cities. This is pushing tenants to buildings that are farther from stations, or older buildings with competitive rents that previously struggled to find tenants. While there has been some slight weakening of asking rents in some cities, asking rents overall are largely flat or slightly improving.
 
For detailed data and market conditions for each zone and metropolitan area, please review the "Japan Office Market View Q4 2012," published Jan.30.




    Attachment: Press Release

    Related Links: View Point & Special Report

    About CBRE Gro​up, Inc.

    CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.​

    Official Twitter account for Japan: @cbrejapan

    Disclaimer

    Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.

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