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Major Companies In Japan Relocate To Smaller Spaces As Staff Return To Work

This post-Covid-19 trend saw higher vacancy rates for larger offices. But demand for logistics space continues to rise. 

March 21, 2022 – Larger scale tenants in Tokyo have started their return to the office, but most have been relocating to smaller spaces, the Nikkei Real Estate Market Report (NREMR) said in their latest issue.

NREMR noted in its March issue that a survey conducted by Sanko Estate showed that the vacancy rate of large-scale buildings with floor areas of 200 tsubos (661 square metres) or more in the five central wards of Tokyo was 3.98% as of the end of December 2021. This is higher by 2.40 percentage points year-on-year even as economic activity started to normalise during the period.

The report attributed the higher vacancy rate to a rising number of relocations by major firms to smaller-sized locations. The number of individual relocation cases compiled by NREMR was also approximately 1.5 times that of the previous year.

Of the relocation cases, only two were to places with areas of size 10,000 tsubos (33,100 square metres) or more. Notable companies like Fujitsu and Lixil, for example, announced that they are significantly reducing their office spaces. 

Fujitsu, which leased a newly built building in Kawasaki City in its entirety in 2020, returned a total of more than 20,000 tsubos (66,100 square metres) of office space in Tokyo, Kawasaki City and Yokohama City in 2021. 

Housing material manufacturer Lixil will, on the other hand, sold three buildings, and reduced the office area it uses by 15,000 tsubos (49,600 square metres) or more.

Relocations to shared spaces were also seen. DeNA – a mobile portal and e-commerce website provider – for example, cancelled its lease contract for 4,690 tsubos  (15,500 square metres) of area in Shibuya Hikarie.

Gunosy, which develops and operates news apps, also cancelled its lease contract for 857 tsubos (2,830 square metres) of area in Ark Mori Building. 

Both companies relocated to WeWork in Shibuya Scramble Square East Tower, and signifi cantly reduced their offices by leasing 700 seats and 100 seats, respectively.

Logistics Space Demand Bucks The Trend

While large-scale offices saw higher vacancies as companies downscale amid the post-pandemic recovery, the logistics facility supply-demand balance continued to tighten in 2021, NREMR said. 

According to CBRE, the vacancy rate of large-scale multi-tenant type facilities for the fourth quarter of 2021 decreased in all three major metropolitan areas. 

The decrease in the Greater Osaka area was especially notable. The vacancy rate fell for six consecutive quarters from the third quarter of 2020. 

In the Greater Osaka area, 270,000 tsubos (893,000 square metres) of area was newly supplied in 2021. As for new demand, a record-high volume of 300,000 tsubos (992,000 square metres) per year was recorded. 

As a result, vacancy rate – which fell below 2% in the first quarter of 2021 –  continues to further decrease.