Xymax Real Estate Institute

RESEARCH REPORT

Observations on the Trend of Corporate Relocations
The relationship between corporate relocations and Tokyo’s office spacemarket based on historical data

October 14, 2020

Offices are essential managerial resources of companies and the basis of corporate activity. Companies set up
offices in certain places but may relocate them to another place (corporate relocation) for various reasons. An
examination of the trend of such corporate relocations will likely lead to a deeper understanding of the supplyand demand relationship in the office space market. In this report, Xymax Real Estate Institute (“Xymax REI”)
considers the future direction of corporate relocations by identifying the relationship between historical
corporate relocation trends and office space market indicators using its data of company relocations in Tokyo,
which Xymax REI has gathered since the 2000s.

Key Findings
The following was found as a result of a comparison of corporate relocations in Tokyo*1 between central
areas*2 and peripheral areas*3 and office space market indicators of the central areas:● The percentage of corporate relocations from peripheral areas to central areas increased between
2003 and 2005 but decreased between 2006 and 2009. It saw a resurgence between 2010 and 2014
but has been on a mild declining trend since 2015.
● The percentage of relocations to central areas drops with a rise in rent levels in those areas, while
the percentage rises with a drop in the rent levels in central areas.
● While the percentage of relocations to central areas drops after the vacancy rate of those areas
drops, the percentage rises after the vacancy rate rises.
● The historical trend suggests that the percentage of company relocations to central areas will
increase when the office space market of the central areas enters a declining phase. However,companies’ reexamination of office strategies due to work style reforms and the corona pandemic
may fundamentally change the workings of corporate relocations.
*1 Includes relocations of branch offices and sales offices, in addition to relocations of headquarters.
*2 Chiyoda, Chuo, Minato, Shinjuku, and Shibuya Wards*3 Areas of Tokyo other than the five wards mentioned in *2 above

1. Introduction
On conducting this survey, we gathered data for 5,541 cases of corporate relocations in Tokyo between 2002
and 2019 and extracted 1,094 cases of relocations that occurred between the central areas and peripheral areas(Figure 1). From these relocation data, we aggregated the annual percentages of relocations to and from central
areas. In section 2, we examined corporate relocation trends by comparing the aggregate results and officespace market indicators.

Observations on the Trend of Corporate Relocations
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 © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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Figure 1: Classification of Corporate Relocations
Relocating from:

Relocating to:Central areas →Central areas ＝

Peripheral areas →Peripheral areas ＝Central areas →Peripheral areas ＝

Peripheral areas →Central areas ＝Classification
Relocation withincentral areas
Relocation withinInternal relocation

peripheral areasRelocation

fromcentral areas
Relocation

Relocation between
tocentral & peripheral areas

central areas

In this survey we focused only on relocations between central and peripheral areas. Relocations within central
areas and peripheral areas are mostly due to individual circumstances of the company (i.e., expiry of contract,
insufficient space, the pursuit of office environment improvement) and do not offer insight into common
backgrounds seen in the market. On the other hand, we believe that the decision of a “dynamic relocation” suchas a relocation between central and peripheral areas is associated with the following four elements of the area
where the company decided to relocate, as it has a large impact on employees’ commute, the distance fromclient companies, recruiting and other corporate activities:①

Business convenience: Numbers of railway stations, shops, municipal/government offices and financialinstitutions; access to clients②

Characteristics of the area that are suitable for the company: Industries clustered in the area; features ofthe area③

Affordable rent levels④

Amount of office space that meets the company’s need (vacancy rate)

Of the above elements, ① and ② do not change over a short period of time, while ③ and ④ (the rent leveland amount of vacancies) change in cycles of several years. Therefore, a comparison between the trend of theseindicators and the aggregation results is likely to provide an insight into the background to the changes in thetrend of corporate relocations over time.

2. Change in the Percentage of Relocations to Central Areas andthe Office Space Market
Figure 2 shows the relationship between the trend of corporate relocations and rent levels (expressed in thenew contract rent index). As rent is the largest fixed cost for companies after personnel expenses, it is obviously
taken into consideration upon relocation. The percentage of relocations to central areas increased between 2003
and 2004 and between 2010 and 2014, when rent levels of those areas declined. Many companies appear tohave relocated to central areas due to the lower rent levels. Meanwhile, we can assume that the higher rent
levels of central areas between 2006 and 2009 placed a burden on companies, leading to a drop in thepercentage of relocations to central areas. The percentage of relocations to central areas has been gradually
declining with the recent mild rise in rent.

Observations on the Trend of Corporate Relocations
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 © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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RESEARCH REPORT｜Xymax Real Estate Institute

Figure 2: Trend of Corporate Relocations and Rent Levels

Figure 3 shows the relationship between the trend of corporate relocations and the supply of office space(expressed in vacancy rate). Office space that suits companies’ needs tends to increase as the vacancy rate of
the central areas rises, resulting in a higher percentage of corporate relocations to central areas. On the otherhand, a drop in the vacancy rate of central areas means the amount of vacant space itself decreases, which limits
the amount of vacant space available for relocation. This prevents companies from relocating, resulting in a dropin the percentage of relocations to central areas.
Figure 3: Trend of Corporate Relocations and Vacancy Rates

Observations on the Trend of Corporate Relocations
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 © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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3. Conclusion
Corporate relocations are the key link between developments in society, corporate activities and the realestate market. Changes in the Japanese economy and companies’ business sentiment affect office demand.
Companies relocate due to changes in the supply of office space and rent levels. In other words, corporate
relocations happen within the supply and demand balance in the office space market.
In this report, we analyzed the relationship between the trend of corporate relocations and the office spacemarket based on the data of corporate relocations in Tokyo that occurred between central areas and peripheral
areas. We believe this analysis suggests that changes in office market indicators going forward will provide aninsight into the future trend of corporate relocations.
The office market has recently been showing signs of vacancy rates rising and rent dropping.*4 If thingsdeveloped as they have done historically, we can assume that the percentage of corporate relocations into
central areas would increase in the future. However, the workings of corporate relocations may see afundamental change as work style reforms, which have been making progress over the past few years,
and the new coronavirus pandemic that broke out in 2020 give rise to new office strategy options forcompanies, including telework from home or satellite offices. Therefore, even if vacancies increased andrent dropped in the office market in the future, we may not see an increase in corporate relocations to central
areas as we had before. Xymax REI will continue to provide beneficial information by continuously observing
and analyzing companies’ relocation and other office strategies.
*4 See Office Market Report Tokyo | Q2 2020, released on August 5, 2020
(https://www.xymax.co.jp/english/research/images/pdf/20200805.pdf)

Survey Overview
Surveyperiod

2002 – 2019

Targetrespondents

Data of 1,094 corporate relocations that occurred between central areas and peripheral
areas (from among 5,541 cases of corporate relocations)Geographicalcoverage

Tokyo

SurveymethodData published on company websites, newspaper articles, etc.

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

Observations on the Trend of Corporate Relocations
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 © 2020 Xymax Real Estate Institute Corporation. All rights reserved.

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