Office vacancy rates rose to record high in both Tokyo and Osaka last month after Japan’s strongest earthquake, according to Miki Shoji Co.
The measure of unoccupied office units in Tokyo rose to 9.19 percent in March from 9.1 percent a month earlier, while the vacancy rate in Osaka gained to 12.4 percent from 11.9 percent in February, a Tokyo-based privately held office brokerage company. Both rates were the highest since Miki Shoji started compiling data in 1990.
Occupancy rates in Osaka may pick up in the coming months as Japanese companies rethink their century-long trend of concentrating resources in Tokyo following the March 11 record temblor that crimped power supply to the capital and radiation concern spurred some residents to flee. Servcorp Ltd., an office-lease and management firm, and recruiter Robert Walters Plc anticipate a pick-up in business in Osaka, the largest city in Western Japan.
“Going forward, the focus will be on the movement by tenants that have offices in Tokyo after the earthquake,” Miki Shoji said in the report released today.
The Topix Real Estate Index dropped 0.5 percent, reversing an earlier gain of as much as 1.9 percent at the 3 p.m. close on the Tokyo Stock Exchange. The Tokyo Stock Exchange REIT Index fell 0.9 percent.
Some companies including Itochu Corp., a Japanese trading company, are considering to relocate their employees to the west after the magnitude-9 earthquake and ensuing tsunami devastated northeastern Japan, crippling Tokyo Electric Power Co.’s nuclear plants about 220 kilometers (137 miles) north of Tokyo.
KVH Co., a Tokyo-based information technology and communication service provider with about 500 employees, quadrupled its staff in Osaka after the temblor and is considering longer-term commitment in the city, said Satoko Furukawa, a spokeswoman at the company.
Servcorp’s office space in Western Japan including Osaka is now fully occupied, said Minori Nishida, a manager at Sydney-based Servcorp, a serviced-office provider. The occupancy rate stood at about 70 to 80 percent on average before the temblor.
“Early indicators show that hiring demand has increased slightly at regional offices outside Tokyo in areas like Kansai, Nagoya or Fukuoka,” said David Swan, Managing Director of Robert Walters Japan and Korea.
The average office rent in the Tokyo’s five main business districts of Chiyoda, Chuo, Minato, Shinjuku and Shibuya in March fell to 17,495 yen per tsubo ($62 per square meter), the lowest ever in March, Miki Shoji said. One tsubo, a standard measure of property area in Japan, is 3.3 square meters, or 35.5 square feet. In February, the rent stood at 17,512 yen a month.
The impact of the quake for property owners may be the reduction in rental income as rolling blackouts force shops to close early, said Mikihisa Hirai, president of Atlas Partners Japan Ltd.
“What is affecting real estate owners the most in Kanto area, including Tokyo, is electric outage,” Hirai said, adding that tenants that are being affected may request rent reduction.