Xymax Real Estate Institute

Office Market Report
Tokyo | Q4 2021
January 26, 2022

Summary

In Q4 (October–December) 2021, the office market of the 23 wards of Tokyo (“Tokyo 23 Wards”) showed adeparture from the previous trend as vacancy rates rose more mildly and rent levels grew marginally.



The vacancy rate was 3.58%, up 0.17 pp from Q3. The availability rate, which includes space for which acancellation notice has been given and vacant space currently available (i.e., accepting tenant
applications), was 5.80%, down 0.11 pp from Q3. The increase and decrease in vacant space showedthat the increase outweighed the decrease for the seventh consecutive quarter, as vacant space increased
by 162,000 tsubo (1 tsubo = approx. 3.3 sqm) and decreased by 146,000 tsubo. The vacancy turnoverratio, which is the ratio of vacant spaces leased to tenants, dropped 0.6 pp from Q3 to 26.5%.

The new contract rent index, i.e., the level of new lease rent, was 88, up 2 points from Q3. The contract
rent diffusion index, which is the percentage of buildings with a rise in new rent minus that of buildings
with a drop in new rent, was unchanged at -31, a negative value for the fifth consecutive quarter.



The paying rent index, which includes both new and existing rents, dropped 3 points to 100.

The average number of free rent months among all new lease contracts was 2.1 months. The ratio of
free rent offered was 72.8%.

Office Market Report | Tokyo | Q4 2021
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Corporation. All rights reserved.

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Vacancy

Figure 1: Vacancy Rate (by Area)

Figure 1 shows the vacancy rates of Tokyo 23

Tokyo 23 Wards
Tokyo 5 Central Wards
Tokyo 18 Peripheral Wards

10%

Wards, the 5 Central Wards (Chuo, Chiyoda, Minato,

8%

Shibuya and Shinjuku Wards) and the 18 Peripheral

6%

Wards since 2011. The rate in Q4 2021 was +0.17 pp

4%

from Q3 at 3.58% in the 23 Wards, +0.16 pp at2%

3.57% in the 5 Central Wards and +0.20 pp at 3.60%

0%in the 18 Peripheral Wards. The rate rose in all three
Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Tokyo 23 Wards

1.87%

2.30%

2.96%

3.41%

3.58%

Tokyo 5 Central Wards

1.74%

2.24%

2.93%

3.41%

3.57%

Tokyo 18 Peripheral Wards

2.26%

2.46%

3.04%

3.40%

3.60%

areas for the seventh consecutive quarter. The gap
between the rates of the 5 Central Wards and the 18
Peripheral Wards has narrowed to nearly zero, as
was in Q3. While the vacancy rate rose slightly fromQ3, the degree of the rise was milder, warranting theneed to monitor future movements carefully.

Figure 2: Vacancy Rate (by Size)
All Buildings

Large Buildings

Small & Medium Buildings

12%

Figure 2 shows the vacancy rates of all sizes of10%

buildings, large buildings (gross floor area (GFA):

8%5,000 tsubo or more) and small & medium buildings

6%
4%(GFA: 300–4,999 tsubo) in Tokyo 23 Wards since2%

2011. In Q4 2021, the vacancy rate rose by 0.17 pp

0%

to 3.54% among large buildings and by 0.17 pp to
Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

All Buildings

1.87%

2.30%

2.96%

3.41%

3.58%

Large Buildings

1.39%

1.78%

2.67%

3.37%

3.54%

Small & Medium Buildings

2.40%

2.87%

3.29%

3.45%

3.62%

3.62% among small & medium buildings.
Figure 3 shows the trend of the availability rate
and the vacancy rate. The availability rate is the sumof currently vacant space, space for which a

Figure 3: Vacancy Rate & Availability Rate
Vacancy Ratecancellation notice has been given and space that is
accepting tenant applications (before the previous

Availability Ratetenant has left) as the numerator and rentable space

12%
10%

as denominator. The rate in Q4 2021 dropped 0.11

8%6%

pp from Q3 to 5.80%. The background to the rising

4%

vacancy rate and the declining availability rate2%

includes a drop in lease cancellations and a0%

reduction in the time from when a cancellation
Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Vacancy Rate

1.87%

2.30%

2.96%

3.41%

3.58%

Availability Rate

4.42%

5.31%

5.75%

5.91%

5.80%

notice is given by the tenant to finding the next
tenant.

Office Market Report | Tokyo | Q4 2021
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Corporation. All rights reserved.

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Figure 4 is the increase and decrease in vacantFigure 4: Increase and Decrease in Vacancies (23 Wards, All Sizes)
Increase(tsubo)Decrease

space. In Q4 2021, the increase in vacant space was
162,000 tsubo, while the decrease was 146,000

Vacancy Rate (right scale)

400000

9%
8%
7%
6%
5%
4%
3%
2%
1%
0%

35000030000025000020000015000010000050000
0tsubo. The increase exceeded the decrease for theseventh consecutive quarter. In Q4, the increase invacant space was smaller than in Q3, since there wasless office space completed in Q4 compared to Q3.
However, the decrease in vacant space nearly
doubled on a year-on-year basis. There are cases

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Increase

136,000

164,000

258,000

190,000

162,000

Decrease

77,000116,000

179,000

144,000

146,000

Vacancy (right scale)

1.87%

2.30%

2.96%

3.41%

3.58%

where companies have relocated as a result of arepositioning of their head offices in view of the endof the COVID-19 pandemic, giving momentum tooffice relocation, which had been sluggish due tothe pandemic.

Figure 5: Vacancy Turnover Ratio (4-quarter moving average)
Vacancy Turnover Ratio

4-quarter moving average

70%
60%
50%
40%
30%
20%
10%
0%

Figure 5 shows the vacancy turnover ratio, theratio of vacant spaces leased to tenants during theQ4 2021
26.5%

quarter to the total vacant office stock (vacant officestock at start of quarter + vacant space added
during the quarter). The ratio in Q4 2021 remained

Vacancy TurnoverQ4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

26.8%

30.9%

34.5%

27.1%

26.5%

130 (Q1 2020=100)
Q2 2008117
120

Q2 2020
104

110

80

Figure 6 is the new contract rent index, whichindicates the rent level for new lease contracts. The
index for Q4 2021 was 88, up 2 points from Q3 2021

Q2 201267

90

small at 0.6 pp.

New Contract Rent

Figure 6: New Contract Rent Index

100

low at 26.5%, although the decline from Q3 was

Q4 202188

70
60

and down 4 points from Q4 2020. Although this is
the first rise in six quarters, the rise is small, and theindex is still lower on an annual basis. It is too early

New Contract Rent Index

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

92

90

89

86

88

Note:The new contract rent index has been revised retrospectively starting Q1 2021.

to deem that rent levels have begun to rise, since
there are still many cases where the lessor indicateslower rent to fill vacancies, the contract rent
diffusion index is in negative territory, and free rents
are increasing.

Office Market Report | Tokyo | Q4 2021
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Corporation. All rights reserved.

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Figure 7 shows the new contract rent index by size

Figure 7: New Contract Rent Index (by Size)
130

of building. The index for large companies with a(Q1 2020=100)120

GFA of 5,000 tsubo or more was up 4 points from Q3

110
100

at 87, while that for small & medium buildings with a

90

80

GFA of 300–4,999 tsubo was down 1 point at 90.

70
60

Small & Medium (GFA less than 5,000 tsubo)

Large (GFA 5,000 tsubo or more)

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021Large Buildings

93

89

89

83

87

Small & Medium Buildings

91

93

90

91

90

Note:The new contract rent index has been revised retrospectively starting Q1 2021.

Figure 8 is the contract rent diffusion index (DI)Figure 8: Contract Rent DI(the percentage of buildings with a rent rise minus

Rent increased (percentage of buildings) (left scale)
Rent decreased (percentage of buildings) (left scale)that of buildings with a rent decline), which indicatesContract Rent DI (right scale)

100%
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
-100%

Contract Rent DI (four-quarter moving average) (right scale)

100
80
60
40
20
0
-20
-40
-60
-80
-100

Q3 200751

Q4 2021-31

Q2 2009-75

the direction of change in new contract rent. The DI
in Q4 2021 was -31, unchanged from Q3 and innegative territory for the fifth consecutive quarter. A
negative DI means there were more buildings withlower new rent that those with higher new rent
compared to six months ago.

Contract Rent DI

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

-22

-29

-36

-31

-31

Paying Rent
Figure 9 shows the paying rent index, which

Figure 9: Paying Rent Index
120 (Q1 2020=100)
Q1 2009
110
104

Q4 2021
100

100

The index lags new contract rent. The index in Q4
2021 dropped 3 points from Q3 to 100 due to cuts in

90existing rent at the renewal of lease and the recent

80

drop in new rent.

Q3 201376

70
60

Paying Rent Index

includes both new lease rents and existing lease rents.

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

104

105

104

103

100

Office Market Report | Tokyo | Q4 2021
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Corporation. All rights reserved.

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Xymax Real Estate InstituteFree Rent

Figure 10: Free Rent

Figure 10 shows the percentage of new lease

1 day or more (%)

Free Rent Granted(left scale)

contracts with free rent (FR) to all new lease

2 months or more (%)

6 months or more (%)
New lease contracts with free rent (month)

Average Free Rent
(right scale)All new lease contracts (month)

100%

7
6
5
4
3
2
1
0

80%
60%
40%
20%
0%

contracts (ratio of FR offered) and the average freerent period (average FR months). In Q4 2021, theratio of offering FR for one day or more was 72.8%,
while that for six months or more was 12.9%. The
average number of FR months was 2.9 among lease
contract with FR and 2.1 among all new contracts.

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

1 day +

38.2%

50.2%

55.5%

65.3%

72.8%

2 mon. +

19.5%

22.5%

26.4%

36.9%

44.1%

2.4%
1.9%
6.6%
8.4%
6 mon. +Average
0.9
1.0
1.3
1.7
All
Free Rent
2.4
2.0
2.3
2.6
w/ FR
MonthsNote:The aggregation method has changed starting Q1 2021

12.9%

Ratio ofFree Rent
Granted

2.1
2.9

110

months have risen, suggesting that more companies
have been trying to attract tenants by offering freerent due to a sense of urgency from the rise in thevacancy rate.

Figure 11: Market Cycle
120

Both the ratio of FR offered and the average FR

Market Cycle

Q2 2008

Figure 11 plots the vacancy rate on the horizontal

Q2 2020

scale and the new contract rent index on the vertical

100

scale on a quarterly basis. It shows the cyclicality of

Q4 202190

the market, with the chart trending to the upper left

80

Q1 2005(vacancy down, rent up) from 2005, moving to the70

Q2 2010lower right (vacancy up, rent down) in and after

9%

2008 and returning to the upper left (vacancy down,

60

0%

1%

2%

Vacancy Rate
New Contract Rent Index

3%

4%

5%

6%

7%

8%

10%

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

1.87%

2.30%

2.96%

3.41%

3.58%

92

90

89

86

88

Note: The vacancy rate before March 2011 is based on data by a major leasing agent.

rent up) in 2010.
The trend of the office lease market, which had
been in a recovery phase since 2013, seems to havechanged in Q2 2020. The chart trended to the upper
right in Q4 2021, as both the vacancy rate and newcontract rent index rose.

Office Market Report | Tokyo | Q4 2021
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Corporation. All rights reserved.

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Xymax Real Estate Institute

TOPIC

Availability Rate by Area and Building
Size

Figure 12：Availability Rate (by Area)

As the TOPIC, we have examined the availability

Tokyo 23 Wards

14%

Tokyo 5 Central Wards

12%

Tokyo 18 Peripheral Wards

10%rate by area and building size. Figure 12 shows theavailability rate of Tokyo 23 Wards, the 5 Central
Wards and the 18 Peripheral Wards since 2011. The

8%
6%
4%

rate in Q4 2021 dropped by 0.07 pp to 5.96% in the2%

5 Central Wards and by 0.20 pp to 5.32% in the 18

0%

Peripheral Wards. The availability rate declined
irrespective of area.
Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

Tokyo 23 Wards

4.42%

5.31%

5.75%

5.91%

5.80%

Tokyo 5 Central Wards

4.43%

5.40%

5.91%

6.03%

5.96%

Tokyo 18 Peripheral Wards

4.38%

5.04%

5.24%

5.52%

5.32%

Figure 13 shows the availability rate in all sizes of

Figure 13：Availability Rate (by Size)
All Buildings

Large Buildings

Small & Medium Buildings

buildings, large buildings (GFA: 5,000 tsubo or more)
and small & medium buildings (GFA: 300–4,900

14%

12%

tsubo) in Tokyo 23 Wards since 2011. In Q4 2021, the10%rate dropped by 0.18 pp to 6.30% in large buildings

8%6%

and by 0.02 pp to 5.24% in small & medium

4%2%

buildings.

0%

Q4 2020

Q1 2021

Q2 2021

Q3 2021

Q4 2021

All Buildings

4.42%

5.31%

5.75%

5.91%

5.80%

Large Buildings

4.31%

5.44%

6.10%

6.48%

6.30%

Small & Medium Buildings

4.54%

5.17%

5.40%

5.26%

5.24%

Office Market Report | Tokyo | Q4 2021
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Corporation. All rights reserved.

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Xymax Real Estate Institute

Reference
Figure 14: Major Building Completions (Q4 2021)
FloorsName

Total

Above ground/

Ward

Address

Completion floor area

Below ground(tsubo)

RBM Ginza Building

11/1

Chuo

7-4-15 Ginza

Nov 2021

809

NIHOMBASHI 3-CHOME SQUARE

12/1

Chuo

3-9-1 Nihombashi

Des 2021

4,278

Source: Compiled by Xymax Real Estate Institute based on information released by companies

Figure 15: Major Office Relocations (Q4 2021)
CompanyFrom"K" LINE

KLL Nihombashi Bldg

LOGISTICS, LTD.

Chuo Ward

MEDIA SEEK INC.

Daiwa Azabu Terrace
Minato Ward

Kairos Marketing
Inc.

Minamishinjuku JEBL
Shibuya Ward

LIXIL Corporation

WING Bldg
Koto WardTOKYO ROPE MFG. Nihombashi Front
CO., LTD.
TECHMATRIXCORPORATION

Chuo WardTo

TimingPurposeJan 2022

AggregationSize(tsubo)Harumi Island Triton
Square592

Chiyoda Ward

Shirokanetakanawa
Station Bldg

Jan 2022

Greater
efficiency

87

Minato Ward

Sumitomo Harajuku
Bldg

Apr 2022

Business
expansion

200

Shibuya Ward

Sumitomo Osaki GardenTower

Aug 2022

Work stylereform

2,008

Shinagawa Ward

Shibusawa Cityplace
Eitai

Aug 2022

Greater
efficiency

500

Koto Ward

Kokusaikougyoumita No.2

Shinagawa Season

Building

Terrace

Des 2022 Aggregation

1,500

Minato Ward
Minato Ward
Source: Compiled by Xymax Real Estate Institute based on information released by companies.

The sizes of offices are estimates.

Office Market Report | Tokyo | Q4 2021
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Corporation. All rights reserved.

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Survey Overview
Increase and Decrease

Vacancy Rate

Description

Main Point

Vacancy Turnover Ratio

in Vacant Space

Vacant space and available space versus total

A quarterly increase and a quarterly decrease in

The ratio of the vacant space leased during the

Office rent index based on new contract rents. This

office stock in the market.

volume of vacant space in the market.

quarter to all the vacant office stock in the market.

index uses a statistical method to remove propertyspecific influences such as size and age of buildings.

Supply and demand balance in the market

Supply and demand balance in the market

Supply and demand balance in the market

Tokyo 23 Wards

MarketBuilding Size

GFA 300 tsubo or more

GFA 300 tsubo or more

GFA 300 tsubo or more

GFA 300 tsubo or more

Every Quarter

ReleaseData of available vacant spaces and buildings.

Data of available vacant spaces and buildings.

Data of available vacant spaces and buildings.

Data of new contract rents including CAM charge.

Independently collected by Xymax.

Independently collected by Xymax.

Independently collected by Xymax.

Independently collected by Xymax.

Data Used in

8,692 buildings

Recent Quarter

12,043 contracts• Vacancy rate

12,043 contracts

673 contracts• Increase in volume of vacant space• Vacancy Turnover Ratio= vacant space ÷ rentable spacea. Space in existing buildings formerly occupied= Volume of vacant space leased during the quarter period: five quarters) based on the collected new• Vacant Spaceby tenants

÷ (Initial vacancy + Vacancy added during thecontract data with property-specific factors as variables

Total available vacant space in completedb. Total rentable area of new completions

quarter)(location, building size, building age, facilities, date ofThen, compute the four-quarter moving averagesigning of lease, etc.).

buildings as of the time of the research.
• Rentable Space• Decrease in volume of vacant space

1) Develop a rolling hedonic model (overlapping

amount with the ratio derived from this formula.

Rentable space of completed buildings as of the a. Space in existing buildings leased under a new

How to Calculate

Level of contract rents

Office Building

SectorData Source

New Contract Rent Index

2) Estimate the quarterly contract rent by assigning thetime of the research.

agreement• Volume of vacant space leased during the quarter: values of a typical building to the model developed in・Availability rateb. Space in new completions but lease is signed

Same as the "decrease in volume of vacant space).

＝available space ÷ rentable spaceprior to the completion• Initial vacancy: Total volume of completed

・Available spacec. Space that had been vacant but the ownerbuildings that are available for lease as of the start3) Calculate the rent estimated in the preceding step

Total available space, which consist of vacantdecided not to leaseof the quarter.

based on Q1 2020 as the base point (=100) by market• Vacancy added during the quarter: Same as thesegment (four segments).

space and space for which notice of cancellation

the preceding step.

has been given.

Where rentable space is not available, the rentable "increase in volume of vacant space"

Where rentable space is not available, thespace is estimated from the gross floor area of the4) Integrate the figure of the preceding step as a Fisher

rentable space is estimated from the gross floor

building using the formula developed in the jointindex using gross floor area as weight. The New

area of the building using the formula developed study with the laboratory of Professor Naoki Kato

Contract Rent Index of the Tokyo office market is thein the joint study with the laboratory of Professor at Kyoto University Graduate School ofintegrated figure.

Naoki Kato at Kyoto University Graduate School

Engineering.

of Engineering.

This model shows changes in new contractrents after
removing property-specificvariables.

Contract Rent DI

Description

Main Point

Index of changes in paying rents (new and existing contract

Distribution of free rent and average length of free rent period.

counting and comparing the buildings where rent has

rents).

Free rent is the time lag between the start of the contract and theincreased and those where rent has decreased.

Direction of contract rent trends

start of the rent payment.

Level of rents paid by tenantsMarket trends that are not reflected in contract rents

Office Building
Tokyo 23 Wards

MarketBuilding SizeAll

GFA 300 tsubo or moreAll

Every Quarter

ReleaseData of new contract rents including CAM charge.

Data of new and existing contracts signed for buildings

Data of new contracts signed for buildings under management by

Independently collected by Xymax.

under management by Xymax.

Xymax.

Data Used in

496 contracts

Recent Quarter

How to Calculate

Average Free Rent (Month)

Index of changes in new contract rents. Calculated by

SectorData Source

Free Rent Granted (%) &Paying Rent Index

4,187 contracts

38 contracts

1) Compare the data of new contract rent per tsubo with that 1) Calculate the rent per tsubo of each tenant from the data

• Free Rent Period

in the 6-month prior period in the same building.

of new and existing lease contracts and memorandums.

(Until Q4 2020) The period between the start of the contract andEach contract was counted separately into three categories:2) Develop a rolling hedonic model (overlapping period: five the startof the rent, shown in number of days.

buildings withquarters) based on the rents calculated in the preceding step (Q1 2021 onward) The period for new contracts (excl. contracts for"rent increase”,(the "paying rent") with property-specific factors as variables expansion within building and recontracts) during which rent has"no change” or(location, building size, building age, facilities, date ofcontinuously been reduced to an amount equivalent or close to“rent decrease”

signing of lease, etc.).

CAM charges since the date of contract.

3) Estimate a quarterly contract rent by assigning the values

・Ratio of Free Rent Granted

2) Calculate the percentage of buildings with “rent decrease” of a typical building to the model developed in the

The ratio of contracts with free rent in all the new contracts (excl.

and buildings with “rent increase”.

preceding step.

contracts for expansion within the building and recontracts)

4) The Paying Rent Index is the rent estimated in the・Average Free Rent (Month) of All the Contracts3) Subtract the percentage of buildings with “rent decrease”

preceding step based on Q1 2010 as the base point (=100).

from the percentage of buildings with “rent increase”. Thisoutcome is the Contract Rent Diffusion Index (DI).

The simple average of the free rent period including lease
contracts with no free rent period.

With this method, influences from replacement of sample

・Average Free Rent (Month) of Contracts with Free Rent

data and deterioration of buildings over age are removed

The simple average of the free rent period of lease contracts with afrom the result.

free rent period

Office Market Report | Tokyo | Q4 2021
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Corporation. All rights reserved.

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Xymax Real Estate InstituteFor further inquiries please contact below:
Xymax Real Estate Institutehttps://soken.xymax.co.jp | E-MAIL: info-rei@xymax.co.jp

Office Market Report | Tokyo | Q4 2021
The contents of this report are as of the time of writing. Xymax Real Estate Institute does not guarantee their accuracy or completeness.
This report may not be reproduced, cited, transmitted, distributed, or reprinted without prior permission of Xymax Real Estate Institute.
Copyright © 2022 Xymax Corporation. All rights reserved.

9