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Tokyo Office Market Snapshot
Q3 2014
Flight to quality drives rental growth in Tokyo Key market takeaways
Strong supply
pre-commitment
Low vacancies
A combination of
flight to quality and a
lack of available space
has driven further
rental growth in
Tokyo’s central Grade
A office market in Q3
2014.
Moderate rental
growth
Flight to quality drives rental growth in Tokyo Market commentary
• Rental growth has been driven by a lack of available space with a current
vacancy of 3.95% across the Grade A Market.
• On the back of headcount growth in the tech sector and Japanese domestic
firms, we’re witnessing a flight to quality. Occupiers are trading up within the
same district, as well as moving from outside the 3KU to the central 3KU.
• Large tenants are finding it difficult to find space. The 2014 new supply of
269,954 sqm is now over 95% leased and the 2015 and 2016 deliveries are
gaining strong pre-lease interest and transactions.
• Current market conditions are pressuring exiting tenants to renew rather than
relocate – often at a higher rent to align with market standards. This trend is
set to continue throughout 2015.
• Tokyo Grade B rents continues to see healthy demand from Japanese
corporates and SMEs driving down vacancies to 2.5%. This has supported
rental growth in the sector with a 3.9% y-o-y achieved by the end of Q314
• The outlook for 2014/15 is continued low vacancy rates, tenant expansions
and modest rental growth
Overall vacancy
Grade A CBD, 5KU (Q3 14) 4.0 %
Rental change (Grade A CBD, 5Ku)
Grade A CBD, 5Ku (y-o-y, Q3 14) 4.8%
Current stock
Grade A (million sqm, grade A) 6.6
New supply
Grade A (2014 forecast) 4.1%
Grade A CBD Headline Rate
(JPY per gross tsb per month, Q3 14) 33,272
Grade B Headline Rate (JPY per gross tsb per month, Q114)
20,261
Indicator Gross Rent
(JPY/Tsb)
Gross Rent
(US$ psf p.a.)
% Rent change
in quarter
% Rent
Change p.a.
Vacancy
Q114
Vacancy
Previous
Quarter
CBD – Central 5 Ku’s JPY 32,272 US$ 103.68 1.5% 4.8% 4.0% 3.7%
CBD – Central 3 Ku’s JPY 36,223 US$ 116.37 1.2% 4.6% 4.2% 3.7%
Otemachi / Marunouchi JPY 40,444 US$ 129.93 3.1% 4.1% 3.0% 3.1%
Roppongi /
Akasaka JPY 34,927 US$ 112.20 -0.6% 2.3% 2.5% 2.7%
Shinjuku JPY 25,037 US$ 80.43 1.6% 11.4% 4.0% 4.1%
Shibuya JPY 31,277 US$ 100.48 4.1% 12.0% 2.0% 1.7%
Grade B Average JPY 20,261 US$ 65.09 2.0% 3.9% 2.5% 2.7%
Note: US$1 / JPY 105
Key market indicators Q3 2014
Appendix Tokyo 5-ku office locations
Shinjuku-ku • Ageing business district popular with
Japanese corporations
• Home to numerous older, large scale
skyscraper projects.
Minato-ku • A major commercial district including
prime residential and retail zones spread
along several metro lines.
• Roppongi, Toranomon and Shiodome are
the most recent significant developments.
Chiyoda-ku • The centre of Tokyo where the Imperial Palace,
Government Offices and National Diet are located
• Marunouchi and Otemachi are the financial
centres and the prime address for Japanese
corporations.
Shibuya-ku • A popular retail, business and
residential area
• Popular with IT and media firms
• Predominately a Grade B office location
however there have been some Grade
A developments in recent years.
Chuo-ku • Established business district in the area
between Tokyo Station, the Tokyo Stock
Exchange and the Bank of Japan.
• Site of future redevelopments, including
the 2020 Olympic village
You see real estate, we see possibilities
The JLL Japan Markets team provides effective leasing and tenant consulting services for the office, retail and industrial markets across Japan.
As strategic advisors to corporate occupier clients, JLL works to lower occupancy costs and risks, while maximizing workplace flexibility and productivity. For landlord and investor clients, JLL delivers leasing strategies that attracts the best tenants on the best lease terms.
Our team of dedicated specialists have the experience to seamlessly support your location requirements, whatever they may be.
Let us show you how we can help.
About JLL Japan Markets
Hajimu Taguchi
Landlord Services
Toshiro Sato
Occupier Services
Masanori Uesugi
Tenant Consulting Koichi Sakata
Office Leasing
Kenji Yoshikawa
Retail Leasing
Neil Hitchen
Head of Japan Markets Tsuyoshi Yamada
Industrial Leasing
COPYRIGHT © JONES LANG LASALLE 2014
For a full market overview briefing, please contact:
Neil Hitchen
Head of Markets, Japan
JLL
+81 3 5501 9203
