Key facts
- Rents for existing Tokyo offices are growing at their fastest rate since the early 1990s, according to a Nikkei survey.
- Japan commercial property investment reached ¥2 trillion ($13 billion) in the third quarter, the highest for that period since 2007, per JLL.
- Office deals made up 36% of total deal volume, with nearly 70% of investments in the Tokyo region, JLL data showed.
- Tokyo office vacancy was 1.3% in the third quarter, among the lowest of major cities globally, according to CBRE.
- Blackstone was planning to sell the office portion of Tokyo Garden Terrace Kioicho for roughly ¥300 billion, a person familiar said.
- The largest office deal in the third quarter was the ¥230 billion sale of Pacific Century Place Marunouchi, according to CBRE.
Rents for existing offices in Tokyo are growing at their fastest rate since the early 1990s, before Japan's economic bubble burst, according to a Nikkei survey. Companies competing for talent are rushing to secure well-equipped, conveniently located work spaces, with the highest rents on the eastern side of Tokyo Station, where tenants are drawn to convenient transportation access.
Commercial-property investment across Japan hit ¥2 trillion ($13 billion) in the third quarter, the highest volume for the equivalent period since 2007, according to data from brokerage firm Jones Lang LaSalle. Office deals occupied 36% of the total deal volume, the largest portion, and nearly 70% of total investments were in the Tokyo region.
"Rent is increasing so investors are still able to see huge amounts of rental upside, especially if the current building's office rent is lower than the market rate today," Koji Naito, research director of capital markets at JLL Japan, said in an interview.
A steady in-office work culture across Japan, limited supply and companies looking to attract talent are contributing to rent growth, especially across top-quality buildings. That is making deals attractive even as the Bank of Japan's rate hikes potentially erode investment returns, with its benchmark rate already at 1.25%, the highest since 1995.