What’s Behind Declining Vacancies in Tokyo’s Non-Core Areas?

Demand for office space in Tokyo is beginning to spread from core areas to non-core areas. This phenomenon is borne out by CBRE data, which show the vacancy rate having dropped by 1.8 pp. over the last year in the non-core market, compared to 1.2 pp. in the core market. Recent tenant relocations indicate that two factors are contributing to the flow of demand into non-core areas: a lack of available units in core areas and the lower rents in non-core areas. With pre-leasing rates of new properties in core areas also on the rise, demand is likely to continue to spread to non-core areas as a secondary target for core area demand.

Figure: Vacancy Rate by Area in Tokyo 23 Wards (y-o-y, ppt)