Demand for office space in Tokyo bounces back as confidence grows

Vacancy rate plunges to lowest level for four years as confidence in the economy returns

PUBLISHED : Wednesday, 16 October, 2013, 12:00am
UPDATED : Wednesday, 16 October, 2013, 5:13am

Tokyo's office vacancy rate fell last month to the lowest level in four years as the amount of space taken up in August more than doubled, according to broker Miki Shoji.

The rate, a measurement of unoccupied space, fell to 7.9 per cent last month from 8.16 per cent in August and was at its lowest since October 2009, according to data from the Tokyo-based company. The Topix Real Estate Index rose 1.1 per cent to its highest closing level since October 1.

Tokyo's office market is improving amid a return of confidence among Japan's large businesses as Prime Minister Shinzo Abe introduces extra stimulus to boost the economy ahead of a sales-tax increase due in April.

The Bank of Japan has pumped US$404 billion into the financial system since April, pushing down the value of the yen and boosting exports and the country's banking industry.

"The vacancy rate was better than I expected," said Daisuke Fukushima, a Tokyo-based analyst at Nomura Securities, who predicted the rate would fall to 8 per cent. "Economic sentiment is improving and that has had a positive impact on the office market." Japan's large businesses are now the most confident they've been since before the collapse of Lehman Brothers.

The Bank of Japan's quarterly Tankan index for big manufacturers, released on October 1, rose to 12 in September from 4 in June, exceeding the median estimate of 7 in a Bloomberg survey.

About 19,000 tsubo of space was absorbed in one month, according to the Miki Shoji report today. That is more than double the 8,400 tsubo of space signed in August, it said. One tsubo, a standard measure of property area in Japan, is 35.5 sq ft.

"We expect the Bank of Japan's monetary easing to produce the desired effects and look for increases in government spending and public works investment to continue through 2015," Masahiro Mochizuki, an analyst at Credit Suisse, wrote in a research note. "Under this scenario, strong demand for office space should drive down vacancy rates in Tokyo's five central wards from now through to 2015."