Survey of Large Office Building Supply in the 23 wards of Tokyo '08

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Britton Shelton
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1 Survey of Large Office Building Supply in the 23 s of Tokyo '8 April 11, 8 We, Mori Trust Co., Ltd. (Head Office: Minato-ku, Tokyo), have since 1986 undertaken continuous field surveys and interviews concerning the implementation of plans for large-scale office building projects (total floor area: 1, square meters) within the 23 s of Tokyo. Results of the most recent surveys and analysis are presented below. In the calculation of total office floor area, where the survey deals with multi-purpose buildings buildings coupled with stores, living quarters or residences, hotels, etc. only the floor area purely for office use is taken into consideration. [Survey Date: December 7] Office supply approaches a turning point -Supply hits a low level in 8, and central Tokyo s share of supply falls as well- Main Results of This Survey 1. Changes in Supply Volume: Annual supply projected to average 71, square meters over the next four years, reflecting a rapid fall to 6% of the level of supply over the past four years In 8, supply is projected to total 67, square meters, roughly one-half the 7 level of 1,19, square meters. In addition, supply is projected to average only 71, square meters/year over the period 8 11 a level less than 6% that of actual supply (1.2 million square meters/year) over the period 4 7. The year 8 marks a turning point away from the trend to high supply that had begun around 2, and supply appears likely to remain at very low levels over the next few years. As for the average office area of each building, the upsizing trend has reversed from 43, square meters (4 7) to a projected 36, square meters (8 11). 2. Trends in Supply Location: Share of supply of the three central s of Tokyo to fall to the 5% range over the coming four years, with a rapid decrease in the number of large-scale development projects in central Tokyo. A look at supply locations over the period 8 11 shows that the share of supply accounted for by locations in the three central s of Tokyo will fall substantially, from 75% of supply (over the period 4 7) to 57%. This phenomenon results from the fact that the recent very large-scale redevelopment projects on former Japan National Railway or public land, such as those in Shiodome, Roppongi, and Konan, were mostly completed by 7 and the volume of such development on underutilized and unused land such as these sites in central Tokyo is set to decrease dramatically. A look at supply by business district shows that while the Otemachi-Marunouchi-Yurakucho area remains the center of supply, districts with the next-highest levels of supply are those such as Nishi-Shinjuku, Osaki/, and, outside the three central s. 3. Trends by Development Site: Rebuilding projects share of supply in the three central s of Tokyo to surpass 8% over the years 8 11 A look at supply trends by development site over the period 8 11 shows that rebuilding sites account for more than 8% of development in the three central s of Tokyo, a clear indication that the leveling off of development of underutilized and unused land in these s has resulted in a shift to a supply structure made up primarily of rebuilding. At the same time, outside the three central s of Tokyo 8% of supply consists of development of underutilized and unused land, implying that the booming office market has led to the steady advancement of redevelopment projects and of putting unused land to more efficient use. For further information, please contact: Research & Planning Yuji Iwata Building Leasing Department1 Mori Trust Co., Ltd. Toranomon 2-chome Tower, 3-17 Toranomon 2-Chome, Minato-ku, Tokyo 15-1 JAPAN Tel: / Fax: iwata-y@mori-trust.co.jp

2 Future Market Outlook In 8, the office-supply trend in Tokyo is shifting in orientation from a trend to large-scale supply centralized in central Tokyo to one to low levels of supply dispersed over numerous locations. Behind this shift is the drying up of sites for large-scale development in central Tokyo and the resulting supply structure focused on rebuilding. With the recent successive completion of large-scale development projects, the renewal of the central-city functions which had been progressing rapidly is likely to slow down somewhat over the coming several years. At the same time, it would be difficult to characterize central Tokyo, home to a concentration of core global business facilities, as having an adequate supply of high-spec, large-scale buildings able to satisfy the needs of these global firms. Office buildings completed since that can be viewed as having suitably high specifications still account for only just over 1% of total office stock in the three central s of Tokyo. As such, the renewal of the central-city functions has only just begun. As competition between cities intensifies on a global basis, large-scale redevelopment in the central city is indispensable to further improving the international competitive strengths of the Tokyo brand in the future. These times thus inarguably require the adoption of innovative measures in support of such efforts. To this end, the swift implementation of an urban revitalization project decided on in June of last year, named The promotion of urban revitalization for the enhancement of international financial base functions, is eagerly anticipated. However, in order to improve the international competitive strengths of the Tokyo market we must strongly promote the development of an urban environment in which global firms, including financial institutions from Japan and overseas, can operate with comfort and peace of mind. Accordingly, many are eagerly awaiting the timely adoption of dynamic innovations, such as new means of urban development that go beyond the bounds of existing frameworks.

3 Figure 1: Trends in supply volume of large-scale office buildings in the 23 s of Tokyo Key Completed supply Incomplete supply under construction Incomplete supply not yet under construction Supply quantity , m average supply: 1,, m2 / year 23 7 (Buildings) Supply quantity average supply: 1,6, m2 / year average supply: 71, m2 / year '86 '87 '88 '89 '9 '91 '92 '93 '94 '95 '96 '97 '98 '99 ' '1 '2 '3 '4 '5 '6 '7 '8 '9 '1 '11 (own buildings) Figure 2: Trends in average total office floor area per building (four-year intervals) 26, m2 / building 3, m2 / building 38, m2 / building 46, m2 / building 43, m2 / building 36, m2 / building ( ) ( ) /7

4 Figure 3: Large-scale office supply volume in the 23 s of Tokyo and individual key business districts (8-11) 23 s Business districts Other 16 s Three central s 57 Oshiage 12% Shinagawa 9% 1% 34% Nishi-Shinjuku Iidabashi Koraku Akihabara Jinbocho Ogawamachi 2% Shinjuku 1% 16% 7% Aoyama Roppongi Bancho Hirakawacho Kasumigaseki Nagatacho Shinbashi Otemachi Marunouchi Yurakucho 65, m2 Ginza Nihonbashi Muromachi Suitengumae Toyocho 95, m2 19, m2 Ikejiri-Ohashi Hiroo Hamamatsucho Harumi Shinkiba Shinjuku Shinagawa Other 16 s 46, m2 28, m2 5, m2 26, m2 35, m2 28, m2 Ebisu Meguro Osaki Shinagawa (Konan) Tamachi Higashi-Shinagawa Approx. supply volume, m2, m2, m2 1, m2, m2 1, m2 1, m2 Figure 4: Trends in the top 1 districts in terms of large-scale office supply volume (8-11) (1, m2 ) 5 K e y Otemachi Marunouchi Yurakucho Nihonbashi Muromachi Bancho Hirakawacho Konan Iidabashi Nishi-Shinjuku Osaki Koraku 4/7

5 Figure 5: Large-scale office supply volume in the 23 s of Tokyo and individual key business districts (4-7) 23 s Shinagawa 2% Shinjuku.2% Other 16 s 4% 9% 1% 33% Three central s 75 34% 8% Business districts Harajuku Yotsuya 3-chome Aoyama Ikebukuro Roppongi 67, m2 Bancho Kojimachi Iidabashi Jinbocho kudan Ogawamachi Kasumigaseki Uchisaiwaicho Toranomon Shiodome Uchikanda Otemachi Marunouchi Yurakucho 99, m2 Ginza Akihabara Hamacho Nihonbashi Kyobashi Muromachi Asakusa Kinshicho Toyocho Monzen-nakacho 1,65, m2 Hamamatsucho Harumi 38, m2 1,57, m2 Ebisu Shirogane Tamachi Shinkiba Approx. supply volume Shinjuku Shinagawa 1, m2 8, m2 4, m2 Shinagawa(Konan) 75, m2, m2, m2, m2 Other 16 s 5, m2 19, m2 Osaki Higashi -Shinagawa 1, m2, m2 1, m2 1, m2 5/7

6 Figure 6: Percentages of large-scale office supply volume by site type (8-11) Three central s Other districts Former Japan National Railway site: 8, m2 (5%) Others: 1, m2 (7%) Redevelopment project: 6, m2 (4%) Underutilized or unused site: 26, m2 (16%) Rebuilding: 1,3, m2 (84%) Underutilized or unused site: 99, m2 (8%) Others: 6, m2 (5%) Rebuilding: 2, m2 (%) Redevelopment project: 37, m2 (3%) Figure 7: by site type of the top 1 districts in terms of large-scale office supply volume (1, m2 ) K e y Rebuilding Redevelopment project Former Japan National Railway site Other underutilized or unused site 1 Otemachi Marunouchi Yurakucho Nihonbashi Muromachi Bancho Hirakawacho Konan Iidabashi Nishi-Shinjuku Osaki Koraku [Definition of terms] Rebuilding: (Developments taking place on) land resulting from the demolition of buildings previously used as offices, hotels, residences, etc. Underutilized and unused site: (Developments taking place on) land not previously used effectively, including land with intermixed parking lots, dilapidated buildings, and a number of empty lots, concentrated residential-use land, former factories, former railway land, etc. Redevelopment project: A redevelopment project carried out by a redevelopment association or Tokyo Metropolitan Government. 6/7

7 Figure 8: Supply trends in three central s of Tokyo and other districts Large-scale office supply (1, m2 ) 3 3,6, m Key Rebuilding Underutilized and unused site ,6,m ,2,m2 1,23,m Three central s Other districts Average office floor area per building 54, 45, m2 37, m2 Three central s 33, m2 38, m2 Other districts 35, m2 Figure 9: Shares of office stock by year of completion of office construction* -5 11% -5 4% 199s 23% 1979 or earlier 45% 199s 45% 1979 or earlier 31% 198s 21% 198s % Three central s Other districts * The data above was prepared by Mori Trust Co., Ltd. based on office floor area (including bank floor area) figures included in Tokyo no Tochi 6 ( Tokyo Land 6 ), published by the Tokyo Metropolitan Government. The above graphs assume that the increase in supply volume in each year equals the office floor area of buildings completed in that year and depict shares by decade calculated using total office stock as of January 1, 6 as the denominator. 7/7

Survey of Large Office Building Supply in the 23 wards of Tokyo '06 -As of : December, 2005-

Survey of Large Office Building Supply in the 23 wards of Tokyo '6 -As of : December, 25- Since 1986, Mori Trust Co., Ltd. (head office: Minato-ku, Tokyo) has conducted a series of field surveys and questionnaires