Tokyo’s prime office vacancy rate dropped for a second quarter in the three months ended December, driven by demand for mid-sized and smaller buildings, according to CBRE Group Inc.
Grade-A vacancy rate in Tokyo’s central five wards fell to 8.8 percent in the fourth quarter from 9.3 percent in the three months ended September, CBRE said in an e-mailed statement. Rents of Grade A buildings declined to 29,800 yen ($338) per tsubo from 29,900 yen per tsubo in the previous quarter. One tsubo, a standard measure of property area in Japan, is 3.3 square meters, or 35.5 square feet.
“Inquiries in the fourth quarter were healthy, with demand increasing at mid-sized buildings,” CBRE said in the report. “Tenants were looking for larger spaces with improved locations and quality.”
New supply of office space, which rose to the highest since 2003 last year, is expected to drop to about a third of 2012 this year, according to a survey by Mori Trust Co., a Tokyo-based developer.
Morgan Stanley is one of the companies taking advantage of declining prices on expectations that office market recovery will lead to higher rents. The New York-based bank said last month it signed an office lease with Mitsubishi Estate Co. to move its Japan operations back to Tokyo’s Otemachi business district amid “attractive conditions for tenants of prime commercial locations.”
Grade A buildings are defined by CBRE as to be less than 11 years old and have at least 10,000 tsubo of total floor space in central wards of Tokyo, Osaka and Nagoya.