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  • Office demand expanding nationwide and to a wider range of industries; Vacancy rate declines for Tokyo Grade A

Office demand expanding nationwide and to a wider range of industries; Vacancy rate declines for Tokyo Grade A

January 16, 2014
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CBRE releases fourth quarter 2013 market trends for office buildings in 13 cities throughout Japan

Noteworthy trends

  • Tokyo’s Grade A vacancy rate declined by 0.6 points quarter-on-quarter (q-o-q) to 7.1%; Osaka Grade A vacancy rate declined by 4.1 points q-o-q
  • Tokyo’s 23-ward vacancy rate declined for the fourth consecutive quarter; Osaka’s overall vacancy rate saw its third consecutive quarterly decline
  • Companies continue to relocate to expand and/or improve their office environments, pushing down the vacancy rate
  • In Japan’s regional cities, vacancy rates declined in seven of 10 major cities, and were flat or slightly up in three

Tokyo 23 Wards

The Tokyo Grade A vacancy rate declined by 0.6 points q-o-q to 7.1%, while Grade A assumed achievable rents rose by JPY50 q-o-q to JPY30,650 per tsubo. With no new supply during the quarter, vacant space was filled by tenants taking additional space in their existing premises, or through relocations on account of re-building or new openings. The vacancy rate for Tokyo's 23 wards fell by 0.2 points q-o-q to 6.3%, the fourth consecutive quarterly fall. There continued to be a wide range of reasons for relocations in the fourth quarter, including companies expanding or relocating to improved locations. In some cases, reflecting the improving market, space that became vacant as tenants moved to new buildings was swiftly filled. Office demand was seen to have expanded to a wider range of industries, as evidenced by positive moves among consumer-related companies.

"There is strong demand for offices in the Tokyo metropolitan area, and little new supply expected in the current quarter or in the first quarter of 2014,” said Hiroshi Koizumi, executive director of CBRE’s Office Services team. “Consequently, even when relatively large vacancies arise, they tend to be filled quickly by companies relocating, which has not been the case until recently. The initial success of Abenomics has pushed office demand to a wider range of industries, with buildings coming online in 2014 also steadily securing tenants.”

Osaka

The vacancy rate among Grade A buildings in Osaka saw a major fall of 4.1 points q-o-q to 12.2%. An increasing number of tenants chose to take space in new, large buildings, valuing them for their premium location and specifications. However, assumed achievable rents for Grade A buildings fell by JPY100 q-o-q to JPY18,800. The vacancy rate for Osaka as a whole also declined by 0.5 points q-o-q, led by the declines in Grade A buildings.

"Companies relocating to improved locations and for better office environments were already strong, but more companies are considering relocating compared to the previous quarter," said Takashi Katono, executive director of CBRE's Osaka branch. "In addition, where demand has previously been focused on well-located and/or relatively new buildings, there has also been demand for older buildings, depending on lease terms. Consequently, the pace of decline in the vacancy rate is likely to accelerate from here."

Nagoya

The Nagoya Grade A vacancy rate rose by 0.7 points to 4.0%. Some vacant space was taken up by companies opening new offices during the quarter, but the vacancy rate rose slightly nonetheless, and assumed achievable rents for Grade A buildings fell by JPY300 q-o-q to JPY21,750. The overall Nagoya vacancy rate rose by 0.4 points to 10.3%. Although the vacancy rate rose, an increasing number of companies relocating were doing so to move into buildings with improved facilities, and the stock of available space in well-located, newer buildings has diminished. We are also seeing new offices being setup by foreign companies as well as temporary-employment agencies aiming to increase hiring to support the healthy manufacturing sector.

"There is limited availability for quality spaces, and companies have begun to open new offices or relocate," said Takahiro Fujimoto, executive director of CBRE’s Nagoya branch. "Going forward, we expect to see increasing demand from companies on the back of improved earnings."

Nationwide

Nationwide demand for offices was brisk in the fourth quarter, and vacancy rates declined in nine out of 13 major cities. Continuing the trend seen in previous quarters, there is little space available in well-located, high-specification buildings. With limited new supply coming online nationwide in 2014, some companies are choosing space in mid-market locations while rents are still relatively low. Office demand is expanding to a wider range of industries with consumer-driven companies taking active steps to secure properties. Especially among more popular buildings, landlords are revising the terms on which offices are advertised, including the incentives offered to attract tenants. Having been flat overall for some time, rents appear to be poised to rise in a wider area.

For further details of market trends and forecasts as well as market data, please review the Japan Office Market MarketView Q4 2013, scheduled for release on January 29th.

 

 

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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