TOKYO — Central Tokyo is seeing the completion of a series of high-rise office buildings this year. Behind the backdrop of major urban development projects, some in the real estate industry are concerned about the so-called “2023 problem,” in which vacancies in existing buildings are expected to increase due to the large supply of new office space.
The approximately 330-meter-high Azabudai Hills Mori JP Tower, the tallest building in Japan, and the 49-story, about 266-meter-high Toranomon Hills Station Tower were completed in Minato Ward in June and July, respectively. Furthermore, the 39-story, about 179-meter-high Shibuya Sakura Stage SHIBUYA Tower is scheduled for completion in November in front of Shibuya Station.
Mori JP Tower, developed by Mori Building Co., has 64 stories above ground and five basement floors. It has attracted much attention by surpassing the 300-meter-tall Abeno Harukas building in Osaka — what used to be the tallest building in Japan. The area around the tower will be occupied by commercial facilities, a hotel, and green areas including orchards and vegetable gardens, and will open in November as the Azabudai Hills complex. The total project cost, including the tower, was approximately 640 billion yen (about $4.38 billion), and it took more than 30 years from planning to completion.
At a preview held for the media on Aug. 8, Mori Building President Shingo Tsuji said, “Various functions are combined and gathered in a compact space. We hope that a diverse group of people will visit the area and that it will become a ‘town’ that welcomes 30 million people a year.”
Vacancies in existing buildings may skyrocket
While high-rise buildings are being developed one after another in the heart of Tokyo, the real estate industry is concerned about the “2023 problem.” It is believed that the large supply of office space in central Tokyo will accelerate the relocation of companies to new buildings, resulting in a sharp increase in vacancies in existing properties.
According to Tokyo-based Miki Shoji Co., a major real estate agency specializing in offices, the average vacancy rate for office space in the five central wards of Tokyo (Chiyoda, Chuo, Minato, Shinjuku and Shibuya) as of July stood at 6.46%. This was the 30th consecutive month that the vacancy rate had exceeded the 5% level, which is considered a benchmark for an oversupply of office space in the industry. The reason why the average vacancy rate has remained relatively high is that an increasing number of companies are downsizing their office space due to the spread of teleworking in the wake of the coronavirus pandemic.
Toyokazu Imazeki, chief analyst at Sanko Estate Co., another Tokyo-based property agency, pointed out, “In the future, the vacancy rate will become much higher and many existing buildings will try to secure tenants even by lowering their rents.”
According to Imazeki, in response to the skyscraper building boom, an increasing number of owners of existing properties are starting “setup office” initiatives, in which they offer offices to companies with the interior work completed.
He added, “With price competition among existing buildings expected to intensify, the key to attracting businesses is likely to be what kind of added value owners can offer other than price.”
(Japanese original by Yusuke Kato, Tokyo Bureau)