Japan real estate

Relocation And Reconstruction Trends In Tokyo Seen Rising In 2020

March 19, 2020 — Large-scale relocations and reconstructions—particularly in Tokyo’s office and residential real estate sectors—are seen to be on the rise this year. 

Cases gathered by the Nikkei Real Estate Market Report showed that in 2020 and 2021, companies with an aggregate leased floor area of about 129,151 tsubos or about 426,700 square metres have indicated relocation plans. The main drivers were business expansions and work-style reforms. 

Nikkei particularly noted that businesses and tenants remain keen to be based in the Shibuya despite the area’s expensive rental rates. This demand has led to a further rise in rent.

Among the top ten planned relocations, WeWork, with a total leased area of more than 33,000 tsubos (109,000 square metres) in 19 buildings within Tokyo, was ranked at the top. 

Rent increases across the board

Nikkei also noted that over the past year, contracted rental levels have increased in all areas.

In the Tokyo Station area, the contracted rental level reached the upper limit of 54,000 yen per tsubo (US$148 per square metre) as of December 2019. This is a 4,000 yen per tsubo increase from December 2018.

In the Shibuya Station area, the upper and lower limits both increased by 5,000 yen per tsubo from the previous year, reaching 34,000 yen to 44,000 yen per tsubo. 

“Even in the survey conducted by Savills, the rent increase in Shibuya Ward over the past year to December 2019 was 10.37%, which is the highest among the five central wards of Tokyo,” Nikkei said. 

Reconstruction projects in the pipeline

In its quarterly survey of construction projects in Tokyo, Nikkei said there were 129 construction projects filed in Tokyo and Yokohama from October 2019 to January 2020. The aggregate gross floor area of the 129 projects is approximately 1.51 million square metres. 

By intended use, 60 projects were residential, 18 were offices, 11 were retail, 11 hotels and 29 were others. By size, 28 were large-scale development projects with a gross floor area of over 10,000 square metres, and there were two projects over 100,000 square metres. 

The largest project in the survey is the Shibaura 1-Chome Project. The project has a gross floor area of approximately 550,000 square metres and includes the reconstruction of Hamamatsucho Building (Toshiba Building) by NREG Toshiba Building and East Japan Railway.

The second-largest project also involves reconstruction. The TTM Project, with a gross floor area of approximately 110,000 square metres, includes the redevelopment of the Dai-Ichi Tamachi Building.