The 37-million metropolis of Tokyo has always been a hub for business activities and is home to more than 61 percent of Japan's total office rental market. Because of economic expansion, strong corporate earnings and increasing foreign investments, the Tokyo office market is extremely competitive. Despite the completion of several large-scale construction projects in central Tokyo in 2018, creating office space of 600,000 additional square meters, vacancy rates kept decreasing throughout 2018.
According to the Japanese real estate broker Miki Shoji, vacancy of office space in Tokyo’s main business districts - Chiyoda, Chuo, Minato, Shinjuku and Shibuya - fell to its lowest levels since the Japanese asset price bubble of 1991, decreasing to 1.88 percent in December. With available office space becoming this scarce, the rent has increased to an average 20,890 Japanese yen per tsubo.
The reason behind the trend is a continuously strong demand for space particularly by IT companies, as well as the rise of shared offices and co-working spaces. Shibuya, also known as “Bit Valley” because of the numerous tech companies headquartered in this area, is one of the most popular locations for office rentals. In October last year, less than one percent of office space in Shibuya was vacant. Even though the macroeconomic environment is uncertain, companies seeking to expand their businesses have led to many pre-leasing commitments and point to a positive property outlook for 2019.
This chart shows the availabilty of office space in Tokyo's main business districts during 2018, as well as prices for that office space.
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