Tokyo office vacancy rate drops 1st time in 21 months

The Yomiuri Shimbun

December 11, 2021

The average office vacancy rate across Tokyo’s five central wards dropped to 6.35% in November, down 0.12 points from the previous month, logging the first decline in 21 months.

Potential reasons for the shrinking vacancy rate include a stronger trend of employees returning to office work in Chiyoda, Chuo, Minato, Shinjuku and Shibuya wards following the decline in novel coronavirus cases.

According to Miki Shoji Co., a leading office brokerage firm, the rate fell by 0.1 point in Minato Ward, where many foreign-affiliated companies are located; by 0.48 point in Shibuya Ward, home to many information technology-related companies; and by 0.66 points in Shinjuku Ward.

The vacancy rate had continued to rise since February 2020, when it was 1.49%, due to the massive shift to telecommuting amid the COVID-19 crisis, and grew about 5 percentage points during this period through October this year.

Since the lifting of the state of emergency at the end of September, companies have been gradually reducing the number of workers telecommuting, and thus the number of people coming to the office increased.

“More companies are reevaluating the importance of face-to-face communication,” an official of a major real estate company said.

The vacancy rate also declined as well-performing companies continued to expand their workforces and office space despite the pandemic.

However, it remains to be seen whether the office market will continue to improve.

Some analysts said the construction of large office buildings will be completed one after another in central Tokyo in the next few years, which will lead to an oversupply.

“With the spread of telecommuting, many large companies are looking to relocate or consolidate their offices. The vacancy rate will probably continue to rise in the future,” said Toyokazu Imazeki, chief analyst at Sanko Estate Co.