Market Trend Survey of Large-Scale Office Buildings in Tokyo’s 23 Wards (Special Bulletin Report)

Market Trend Survey of Large-Scale O�ce Buildings in Tokyo’s 23 Wards

For more information & inquiries, please contact...Jungo Nishio or Keita Oka｜Marketing Department, Leasing Operations Division, Mori Building Co., Ltd.Roppongi Hills Mori Tower, 6-10-1 Roppongi, Minato-ku, Tokyo 106-6155｜TEL 03-6406-6672｜URL http://www.mori.co.jp

Since 1986, Mori Building Co., Ltd. (Minato-ku, Tokyo; President & CEO Shingo Tsuji) has regularly conducted market surveys of demand and supply trends for 10,000㎡-class or higher office buildings that were constructed in Tokyo’s 23 wards since 1986 (hereinafter referred to as “large-scale office buildings”). Having just completed the tabulation of the results of our most recent survey, we are pleased to present you with this report.

April 22, 2014

Tokyo’s 23 Wards○ Average annual supply volume over the next 5 years (1,050,000㎡/year) will remain at the same level as the historic　 average supply volume (1,040,000㎡/year).○ Supply volume in 2014 will be 880,000㎡ (152% of the previous year’s volume). Central 3 Wards○ Average annual supply volume over the next 5 years (720,000㎡/year) will account for 69% of the supply volume of　 Tokyo’s 23 Wards.○ Supply volume in 2014 of 710,000㎡ (131% of the previous year’s volume) will account for 81% of the supply volume　 of Tokyo’s 23 Wards.

Tokyo’s 23 Wards○ Absorption capacity (new demand) in 2013 was 990,000㎡ (71% of the previous year).○ Supply volume in 2013 was 580,000㎡ (33% of the previous year’s volume). Vacancy rate at the end of 2013 was 6.2% 　(1.6 point decrease from the previous year).Central 3 Wards○ Absorption capacity (new demand) in 2013 was 610,000㎡ (78% of the previous year).○ Supply volume in 2013 was 540,000㎡ (56% of the previous year’s volume). Vacancy rate at the end of 2013 was 5.9% 　(0.6 point decrease from the previous year).

■ Supply Trends

■ Demand Trends

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■“Survey of Large-Scale O�ce Building Market in Tokyo’s 23 Wards” Framework

○ Research execution: ○ Research area: ○ Research subject buildings:

Special Bulletin Report of Survey Results as of December 31, 2013

End of December 2013Tokyo’s 23 WardsO�ce buildings with total �oor area exceeding 10,000㎡ with a construction completion date of 1986 or later

Supply volume is calculated based on publicly available information as well as on-site and “interview” research undertaken in December 2013.The amount of supply volume is a tabulation of gross total office floor area of all large-scale office buildings completed since 1986 including Mori Building properties.Absorption capacity (new demand) is the newly occupied office floor space for a given year of all large-scale office buildings constructed since 1986 and is calculated as follows: (vacant office floor space at the end of the previous year) + (newly supplied floor space) - (vacant floor space at the end of the current year). In order to compare “supply volume” and “demand volume”, leasable floor space values are converted to a total floor area value by applying an average “effective rentable space ratio” for large-scale buildings.

Market Trend Survey of Large-Scale Office Buildings in Tokyo’s 23 Wards (Special Bulletin Report)

‒ 1 ‒

0

50

100

150

200

250

’93’92’91’90’89’88’87’86 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15 ’16 ’17

1 Supply Trends

The annual average supply volume of large-scale office buildings in Tokyo’s 23 Wards over the next 5 years (2014~2018) is forecast to be 1,040,000㎡/year, which is the same level as the historic average (1,050,000㎡/year). Although the supply volume in 2014 (880,000㎡) will increase from that of the previous year (580,000㎡), it will not meet the historic average (1,040,000㎡). It is forecast that the supply level above 1,000,000㎡ will continue after 2015. (Figure 1.)

Tokyo’s 23 Wards○ Average annual supply volume over the next 5 years (1,050,000㎡/year) will remain the same level as the historic average supply volume (1,040,000㎡/year).○ Supply volume in 2014 will be 880,000㎡ (152% of the previous year’s volume).Central 3 Wards○ Average annual supply volume over the next 5 years (720,000㎡/year) will account for 69% of the supply volume of Tokyo’s 23 Wards.○ Supply volume in 2014 of 710,000㎡ (131% of the previous year’s volume) will account for 81% of the supply volume of Tokyo’s 23 Wards.

Figure 1. Large-Scale Office Building Supply Volume Trends in Tokyo’s 23 Wards

1986~2013① Properties· · · · · · · · · · · · · · · · · · · · · · 816② Eliminated Properties· · · · · · · · · · · · · · 9③ Gross Floor Space· · · · · · 29,020,000m2

④ Eliminated Floor Space · · · · · · ·170,000㎡⑤ Existing Stock · · · · · · · · · · · · 28,850,000㎡

2014~2018① Properties · · · · · · · · · · · · · · · · · · · · · · · 93② Gross Floor Space · · · · · · 5,260,000㎡

Incomplete Properties

Supply (No. of Properties)

Complete Properties

Eliminated Properties

12

24

32

4136

1514 16

19

28

4237

19

2826

2125

31 2932

16 23 1719

4744 46

2930

21

40

5655（1）

83（6）83（6）

100（2）

99（1）

36

72

91

125

216

121

77

154

119

65

86 85

58

175

88

111126

102102 9999108

104（1）

114（6）118

183

92

119

74

Historic Average1,040,000㎡/year

Average from 20141,050,000㎡/year

Over the next 5 years (2014~2018), average annual large-scale office building supply volume in the Central 3 Wards will be 720,000㎡/year, higher than the average of 680,000㎡/year for the past 10 years (2004~2013). (Figure 2.)

Figure 2. Large-Scale Office Building Supply Volume by Area

200

250

150

100

50

02004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Other 20 Wards

Central 3 Wards

6988

33

121

31

99

105

49

154

9044

21

65

6536

49

85

37

81

117

97

54

45858

7181

30

111

1788

78

175

21

8629

119

2004~2013Average Supply:680,000/year

2014~2018Average Supply:720,000㎡/year

64

62

126

Supply/Properties( ) brackets indicate the no.of eliminated properties

Supply/Floor Space( ) brackets indicateeliminated �oor space

’18

117

2018

69

877

77

102

25

(1)

(3)

(1)(1) (2)

(1)

77

17 17

（10,000㎡）

（10,000㎡）

Market Trend Survey of Large-Scale Office Buildings in Tokyo’s 23 Wards (Special Bulletin Report)

‒ 2 ‒

The Central 3 Wards is forecast to account for 69% of supply during the next 5-year period, showing an increase from the previous 5-year period. When examined by year, 2017 is the only year that falls below average with the Central 3 Wards accounting for 51% of supply. (Figure 3. and Figure 4.)

Figure 3. Large-Scale Office Building Supply Volume by Area

Figure 4. Annual Large-Scale Office Building Supply Volume by Area over the next 5 Years

2 Demand Trends

In 2013 in Tokyo’s 23 Wards, absorption capacity for large-scale o�ce buildings was 990,000㎡ (71% of the previous year). On the other hand, the supply volume was 580,000㎡ (33% of the previous year’s volume), falling below the absorption capacity. As a result, the vacancy rate at the end of 2013 dropped by 1.6 points to 6.2%. (Figure 5.)A look at supply and demand in the �rst half and second half of 2013 reveals that in both the absorption capacity exceeds supply volume. In particular, the absorption capacity for the second half is more than twice the amount of the stagnating supply volume, indicating a �rm demand.

Tokyo’s 23 Wards○ Absorption capacity (new demand) in 2013 was 990,000㎡ (71% of the previous year).○ Supply volume in 2013 was 580,000㎡ (33% of the previous year’s volume). Vacancy rate at the end of 2013 was 6.2% (1.6 point decrease from the previous year). Central 3 Wards○ Absorption capacity (new demand) in 2013 was 610,000㎡ (78% of the previous year).○ Supply volume in 2013 was 540,000㎡ (56% of the previous year’s volume). Vacancy rate at the end of 2013 was 5.9% (0.6 point decrease from the previous year).

Figure 5. Large-Scale O�ce Building Supply Volume, Absorption Capacity and Vacancy Rate Trends

Supply Volume New Demand (Absorption Capacity) Vacancy Rate

0 20 40 60 80 100（%）

’04～’08

’09～’13

’14～’18

Other 20 WardsCentral 3 Wards

74%（790,000㎡/year）

26%（280,000㎡/year）

55%（580,000㎡/year）

45%（460,000㎡/year）

69%（720,000㎡/year）

31%（330,000㎡/year）

0 20 40 60 80 100（%）

2018

2014

2015

2016

2017

Central 3 Wards

81%（710,000㎡/year）

73%（810,000㎡/year）

76%（770,000㎡/year）

51%（640,000㎡/year）

49%（620,000㎡/year）

69%（690,000㎡/year）

0

50

100

150

200

250

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 1H 2013 2H 20132012

183

92

123 119130

74 8099 91 91

54

125

48

216

121

142

77

115

154157

119122

65

34

86

31

8569

117

91

5941

17

40

175

139

3644

7288

8.8

4.93.4 2.7 3.1 2.4

1.2

3.6

8.16.7

5.33.2 2.8 2.5

3.8

5.9 6.3 6.97.8 （%） 7.0 6.2（%）

2013

183

99

58

6.2

Average supply volume in the Central 3 Wards (69%)

224

Other 20 Wards

（10,000㎡）

27%（300,000㎡/year）

31%（310,000㎡/year）

19%（170,000㎡/year）

24%（250,000㎡/year）

Market Trend Survey of Large-Scale Office Buildings in Tokyo’s 23 Wards (Special Bulletin Report)

‒ 3 ‒

（%）

（%）

（%）

Absorption capacity for large-scale o�ce buildings in the Central 3 Wards in 2013 reached 610,000㎡ (78% of the previous year). With absorption capacity exceeding the supply volume (540,000㎡), the vacancy rate at the end of 2013 dropped by 0.6 points from the previous year to 5.9%. In the �rst half, absorption capacity was proportional to the supply volume, causing the vacancy rate to remain nearly �at. In the second half, absorption capacity exceeded the supply volume, causing the vacancy rate to drop.On the other hand, absorption capacity in the Other 20 Wards was 380,000㎡ (62% of the previous year). The supply volume drastically decreased to 40,000㎡, compared to 780,000㎡ last year. As a result, the vacancy rate at the end of 2013 dropped by 2.7 points from the previous year to 6.6%. In the Other 20 Wards, although the supply volume remained low throughout the year, absorption capacity was at reasonable level. Correspondingly, the vacancy rate dropped by 1.6 points from the end of 2012 (9.3%) to the end of June 2013 (7.7%), and dropped further by 1.1 points to 6.6% by the end of 2013.

Figure 6. Supply, Absorption Capacity and Vacancy Rate Trends by Area

New Demand (Central 3 Wards) New Demand (Other 20 Wards)

Vacancy Rate (Central 3 Wards) Vacancy Rate (Tokyo’s 23 Wards)

Vacancy Rate (Other 20 Wards)

Supply (Central 3 Wards) Supply (Other 20 Wards)

2004 2005 2006 2007 2008 2009 2010 2011 1H 2013 2H 20132012

88

33

117

25

69

8

85

30

105

49

103

54

90

29

78

43

44

21

29

5 65

21

35

−4

36

49

50

19

36

24

39

15

16

－20

0

20

40

60

80

100

120

140

160

180

200

220

240

6.4

4.03.3

1.8

3.3

5.6

8.08.4

7.7

9.3

5.3

3.22.8

2.5

3.8

5.9

6.36.9 7.0

7.8

4.2

2.52.5

3.2

4.2

6.1

5.05.7

9.3

7.8

5.96.66.5

6.6（%）（%）

（%）

6.26.5

2013

37

81

21

70 7097

78

61

78 4

54

38

613

125

6.6

6.25.9

（10,000㎡）