September 2020

DAIWA REAL ESTATE APPRAISAL REPORT

Effects of Corona on the Osaka Office Market(Author)

Kazumasa Takeuchi

Chief Research Analyst
Kazumasa.takeuchi@daiwakantei.co.jp
Research & Marketing Office

Amidst the spread of the new coronavirus outbreak, the office vacancy rate in Osaka is at its
lowest level since 1992, which marked the end of the bubble economy. Meanwhile, asking rents
continue to rise in the Umeda and Yodoyabashi/Hommachi areas. At this point in time, the overallsentiment of market participants in Osaka is not necessarily bearish about the current market,
but with the penetration of remote working, as well as the planned expansion of supply from 2022,
more and more people are concerned about the future of the office market. The following is asummary of the current Osaka office market and demand trends to provide a reference foroutlook.
1. Osaka Office Market Overview
・At the end of July 2020, the vacancy rate in the Osaka Business District rose by 0.89% since
the end of last year, to 2.71%. Compared to the same period, the vacancy rate in the Umeda
area rose from 0.98% to 1.83%, and in the Yodoyabashi/Honmachi area from 1.01% to 2.47%.
Nevertheless, Osaka's office vacancy rate is currently at its lowest level since 1992.
・Top rents at major buildings in the Umeda area are over 35,000 yen per tsubo, due to excess
demand that continued before the spread of the corona outbreak.
・However, asking rents in the Osaka Business District in July were down ¥38 per tsubo to¥11,988 per tsubo month over month; April saw the first drop since December 2016 (down¥10 per tsubo from the previous month), and July was the second month of rent decline sincethen. While rents continue to rise in the Umeda, Yodoyabashi and Hommachi areas, rents inthe Shinsaibashi and Namba areas are now declining after peaking in March.
Chart 1:Vacancy Rate in Osaka Business District

Chart 2: Rents in Osaka Business District

Jan 2013 = 100

Source: Miki Shoji, Daiwa Real Estate Appraisal

Source: Miki Shoji, Daiwa Real Estate Appraisal

Copyright ©2020 Daiwa Real Estate Appraisal All rights reserved|1

2. Office Supply and Demand・In Osaka, the vacancy rate for existing buildings is 2.6%, but the vacancy rate for newbuildings has risen to 42.8% from 0% in the second half of 2019. Meanwhile, in the 5 wards ofcentral Tokyo, the vacancy rate for new buildings is 2.1%, which is even lower than the 2.8%
vacancy rate for existing buildings.
・Since the first half of 2013, the leasable area in the Osaka Business District has remained flat
at approximately 2.2 million tsubo, but the leased area has continued to increase. The spreadof the new coronavirus has led to a decline in leased space for five consecutive months since
March 2020: The total increase in vacant floor space in June and July was over 10,000 tsubo.
・In fact, vacant space in Tokyo is increasing more rapidly than in Osaka, but in Tokyo this isdue to an increase in supply. In Osaka, on the other hand, this is simply due to lower demand.
Osaka's leasable space was essentially unchanged compared to the end of the year, apartfrom the completion of the Obic Midosuji Building in January 2020 , which was subsequently
halted for lease.
Chart 3:

Vacancy Rate for New Buildings
in Osaka Business DistrictChart 4:

Source: Miki Shoji, Daiwa Real Estate Appraisal

Osaka Business District Office Space

Source: Miki Shoji, Daiwa Real Estate Appraisal

Chart 5: Tokyo Business District Office Space

Chart 6: Change in Vacant Spacein Osaka and Tokyo

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Source: Miki Shoji, Daiwa Real Estate Appraisal

Source: Miki Shoji, Daiwa Real Estate Appraisal

3. Office Space by District
・New supply was also sluggish in the Umeda and Yodoyabashi/Hommachi districts, which
account for 34% and 31% of the Osaka Business District's office area, respectively. In addition,
many properties were demolished or closed for lease due to reconstruction into complexes,
and thus the leasable area has come to a standstill.
・In the Osaka Business District, vacant area decreased by 23,000 tsubo in all six districts in
2019. However, this was due to a decrease of 17,000 tsubo in leasable area.
・By the end of July 2020 the leased area was down by 20,000 tsubo YoY, mainly in the Umeda
and Semba districts, and another 1,000 tsubo of leasable area was up. As a result, vacant
space at the end of July was up by 19,000 tsubo YoY. Vacant space increased in four major
areas (Umeda, Yodoyabashi-Honmachi, Semba, and Shin-Osaka).
Chart 7: Osaka Office Area Ratio(as of July 2020)

Source: Miki Shoji, Daiwa Real Estate Appraisal

Chart 9:

Office Space in Umeda Area

Chart 8:Changes in Osaka Office Space(vs. End of Previous Year)

Source: Miki Shoji, Daiwa Real Estate Appraisal

Chart 10: Office Space in Yodoyabashi-Honmachi Area

Copyright ©2020 Daiwa Real Estate Appraisal All rights reserved|3

Source: Miki Shoji, Daiwa Real Estate AppraisalSource: Miki Shoji, Daiwa Real Estate Appraisal

Copyright ©2020 Daiwa Real Estate Appraisal All rights reserved|44. Office Supply and Demand in the Future
・At the moment, vacancy rates have begun to rise, but the general sentiment among market
players in Osaka is not necessarily bearish.
・In both 1998 and 2008, when the economy was in recession, there was a significant decline inleased space by 45,000 to 48,000 tsubo. Therefore, it is likely that in 2020, leased space could
decline by 40,000 to 60,000 tsubo, given the significant deterioration in economic growth thisyear (already down 20,000 tsubo by July).
・With office supply at a low level in 2021, we can expect vacancy rates to improve later in theyear if the decline in demand bottoms out.
・Although large buildings will begin to be supplied in Umeda, Yodoyabashi, and other areasfrom 2022 onward, demand for office space is expected to recover due to the stimulation of
new supply. While the new supply may cause a temporary increase in the vacancy rate, overthe medium term, it is expected to improve the business functions and vibrancy of central
Osaka and contribute to further growth and increased attractiveness of the city.
Chart 11: Osaka Office Supply Forecast
Chart 12: Economic Growth Rate and Change inRental Area in Osaka

Source: Sanko Estate, Daiwa Real Estate Appraisal

Chart 13:COMPLETION DATE

Source: Cabinet Office, Miki Shoji, Daiwa Real Estate Appraisal

New Buildings and New Construction in Osaka

PROPERTY

Address

Gross Floor

Number ofStories

Jan.2020

Obic Midosuji Building

Hiranocho, Chuo-ku

16,799 tsubo

25

Aug.2021

Honmachi Sankei Building

Honmachi, Chuo-ku

9,020 tsubo

21

Mar.2022

Osaka Umeda Twin Towers SouthUmeda, Kita-ku

78,650 tsubo

38

Aug.2022

Nippon Seimei Yodoyabashi Building

Kitahama, Chuo-ku

14,914 tsubo

25

2023

UD Midosuji Building PJ

Awaji-cho, Chuo-ku

2024

Shinsaibashi PJ

Minamisemba, Chuo-ku

2024

Midosuji Dai Building

Minami-Kyuhoji, Chuo-ku

2024

Umeda 3-chome PJ

Umeda, Kita-ku

2024

Northwest Building

2025

Yodoyabashi Station East Area Urban Renewal PJ

2025
2027 年
Source:－－16,335 tsubo

31－－

68,668 tsubo

39

Umeda, Kita-ku

17,848 tsubo

23

Kitahama, Chuo-ku

22,264 tsubo

28

Yodoyabashi Station West Area Urban Recycling PJ

Kitahama, Chuo-ku

39,870 tsubo

28

Umekita 2nd Phase South District

Oofuka-cho, Kita-ku

96,800 tsubo

39/3

Miki Shoji, Daiwa Real Estate Appraisal

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