Leading office markets in JapanEconomic activities in Japan are predominantly concentrated in Tokyo, and many of Japan’s largest corporations and financial institutes have their headquarters in the capital city. With around 37 million inhabitants, the Tokyo metropolitan area, which includes the neighboring prefectures Kanagawa, Saitama, and Chiba, is one of the most populous metropolitan areas in the Asia Pacific region. As the financial and administrative center of Japan, Tokyo is the leading market for office real estate in the country, followed by Osaka and Nagoya. Osaka is considered the economic center of the Kansai region, while the Greater Nagoya Area is known as a hub for the manufacturing and automotive industry in Japan. The floor area of office space in the metropolitan areas of Tokyo, Osaka, and Nagoya accounts for half of the total office floor space in Japan. The office real estate market is an important subsector for real estate investment in Japan. Real estate investment trusts held over one thousand office buildings in Japan and acquired office property worth 362 billion Japanese yen in 2019.
Impact of the global pandemicPrior to the global coronavirus (COVID-19) pandemic, vacancy rates for office space were declining across Japan. In Tokyo’s central business districts, the vacancy rate dropped to less than two percent. Likewise, commercial land prices and rents rose steadily.
The outbreak of the coronavirus has slowed this growth trend. As of 2020, rising vacancy rates and negative net absorption could be observed, indicating that the office space vacated exceeded the available space absorbed that year. The pandemic has led to a rethinking regarding working styles and office space among some employers in Japan. In response to the pandemic, more companies began to introduce telework, and some large corporations announced plans for a permanent shift to remote working and a reduction of their office space in the coming years.