August 5, 2024

Large-Scale Office Building SupplySurvey for Tokyo's 23 Wards 2024

Mori Trust Co., Ltd. (Head office: Minato-ku, Tokyo; President: MiwakoDate) announces the latest survey results on office supply trends inTokyo's 23 wards. We have been conducting surveys and analysis once ayear on supply trends for large office buildings (total office floor area of10,000 ㎡ or more) in Tokyo's 23 wards since 1986, and for medium-sized
office buildings (total office floor area of 5,000 ㎡ or more but less than
10,000 ㎡ ) since 2013. (*For mixed-use buildings including stores,residences, hotels, etc., the total floor area excludes uses other thanoffices.)

Key Points of the Survey results
１.Trends in Supply Volume· The supply of large-scale office buildings in 2023 was 1.38 million ㎡, thesecond largest supply in the past five years after 2020.
· In the five years from 2024 onwards, no year will exceed 2023, and theaverage supply over the next five years is expected to remain at 850,000 ㎡,lower than the average of 1,070,000 ㎡ over the past 20 years, indicating that
supply is expected to be suppressed.

２. Trends Supply Areas・When the supply ratio for the past five years and the next five years wastabulated by ward, the three central wards (Chiyoda, Chuo, and Minato)
accounted for approximately 70% of the total supply in both periods. As atrend, the percentage of Chiyoda Ward is decreasing while that of Chuo Wardand Minato Ward is increasing.
・In the past five years, “Toranomon/Shimbashi” has been the top supplier, but“Yaesu/Nihonbashi/Kyoubashi” is expected to be the top supplier in the next
five years. In addition, “ Shirokane/Takanawa ” and “ Akasaka/Roppongi, ”
which have not ranked in the top five for the past five years, are expected torise to second and third place, respectively, over the next five years.

３. Supply Trends by Development Site
In the three central wards of Tokyo, the proportion of “reconstruction” wasapproximately 80% between 2014 and 2018, but has fallen to 40% since 2019,with the majority of development land shifting to “underutilized and unused
land (redevelopment, etc.)” Outside the three central wards, “underutilizedand unused land (redevelopment, etc.).” have constituted the main areas ofdevelopment

since

2014.

(Thedefinitionsof“reconstruction”

and“underutilized and unused land (redevelopment, etc.)” are described below.)

４. Supply Trends of Medium-sized Office Buildings
The supply of medium-sized office buildings in 2023 was 66,000 ㎡, marking
another decrease compared to 2022, when there was a large supply.
Although it is expected to fluctuate to 124,000 ㎡ in 2024 and 67,000 ㎡ in
2025, the average supply over the next two years will be 96,000 ㎡, roughly
equivalent to the average over the past 10 years, and supply is expected toremain stable.
SummaryAlthough there will be a large supply in 2023, the trend of supply restraint
will continue from 2024 onwards
The supply of large-scale office buildings in 2023 was 1.38 million ㎡, thesecond largest supply in the past five years after 2020. On the other hand,the average supply over the five years from 2024 onwards is expected to belower than the average supply over the past 20 years, so future supply
trends are likely to be subdued.
Although there were concerns that the market would deteriorate in 2023
due to the massive supply of large-scale offices, the vacancy rate has
actually shown trend toward recovery, and demand for offices has remained
strong. The reasons behind this include an increase in the rate of people
going to work and the normalization of economic activity.
From 2021 to 2022, there were many relocations due to reasons such as
reducing rent and reducing office space due to teleworking, but in 2023,
there was an increase in relocations due to business expansion, increasing
staff numbers, and strengthening recruitment.
As such, while demand for office space expands due to revitalized corporate
activity, the supply of new office buildings is likely to be restrained going
forward, and vacancy rates are expected to improve at an accelerating pace.
Against this, there is a growing polarization between buildings that can findtenants even with high rents and buildings that cannot find tenants unlessthe rent is lowered, and trends for each building and area are attracting
attention.

One year since COVID-19 was classified as Category 5: Supply of highvalue-added office buildings stimulates further office demand
It has been one year since COVID-19 was classified as Category 5 on May 8,
2023. As places of work and working styles have become more diverse, thevalue of offices has been redefined, and they are now seen as spaces that
support corporate growth and investment targets for attracting talent, rather
than simply as workplaces or costs for business operations. In recent years,
there have been an increasing number of examples in which the elements
necessary to achieve these goals have been incorporated into the design.
Specifically, these elements are wide-ranging and comprised of various
factors, including and in addition to the embodiment and realization of acorporate identity that contributes to improving employee engagement and asense of belonging, they also include the promotion of interaction andcollaboration that contributes to innovation and business promotion, and thepursuit of comfort that contributes to employee wellness and improvedproductivity.
In addition, in order to respond to various social changes and changes inneeds in the future, it is essential that practices be varied and flexible, andbe designed with consideration of SDGs and ESG.
As society changes and companies are required to change accordingly, theroles that offices should play will become more diverse and sophisticated.
The supply of high-value-added offices is expected to revitalize the market
and strongly stimulate demand.

Details of “Large-Scale Office Building Supply Survey forTokyo's 23 Wards 2024”

1. Trends in Supply Volume
The supply of large-scale office buildings in Tokyo's 23 wards in 2023 was
1.38 million ㎡, the second largest supply in the past five years after 2020.
Looking at the supply volume over the five years from 2024 onwards, there
will be no year that exceeds the supply volume of 2023, and the highest supply
volume over the next five years, 2025, at 1.18 million ㎡, is not a large area
compared to the annual supply volume over the past 20 years. In addition,
supply is expected to be kept low at 650,000 ㎡ in 2024, 600,000 ㎡ in 2027,
and 780,000 ㎡ in 2028, so the average supply over the next five years isexpected to remain at 850,000 ㎡, lower than the average supply of the past
20 years, which was 1.07 million ㎡. The supply of large-scale office buildings
continues to be subdued. [Chart 1-1]
As a result of calculating supply shares of new office space after tallying thesupply by ward and dividing them into the three central wards and other wards,
the supply corresponding to the three central wards will consistently exceed
70% over the next five years. The pillar of supply continues to be Tokyo’s
three central wards. [Chart 1-2]
When tracking trends in the supply of large-scale buildings by size over fiveyear periods, the supply by size was balanced between 2004 and 2008 andbetween 2009 and 2013, but from2014 to 2018 the proportion of buildings
with office floor space of 100,000 ㎡ or more began to rise, exceeding 50%,
and will exceed 60% between 2024 and 2028. The trend of large-scale officebuildings toward ultra-large-scale buildings continues. [Chart 1-3]

2. Trends Supply Areas
Supply trends of large-scale office buildings are investigated by area.
When the supply share for the past five years and the next five years are tallied
by ward, the share for Tokyo’s three central wards exceeds 70% for both In
the breakdown of the three wards in central Tokyo, the proportion of Chiyoda
Ward has decreased from the past five years to the next five years, while thatof Chuo Ward and Minato Ward has increased. Among other wards, Shibuya

Ward, which had a large proportion of development over the past five years,
has completed its development, and Shinagawa Ward's proportion is expected
to increase over the next five years. [Chart 2-1]
When comparing the top 10 districts after tabulating the changes in supply bydistrict, supply in “Toranomon/Shimbashi,” which had been at the top for thepast

fiveyears,

hasslowed,

andoverthenext

fiveyears“Yaesu/Nihonbashi/Kyobashi” will sustain the largest supply. In addition,“Shirokane/Takanawa” and “Akasaka/Roppongi,” which were out of the
rankings for the past five years, are expected to rise to second and third place,respectively, over the next five years, and development in the Minato Wardarea, which includes these districts, is expected to become more active from2024 onwards. [Chart 2-2] [Chart 2-3]
* Data showing percentages may not add up to 100% because they are rounded off to the nearest
whole number.

3. Supply Trends by Development Site
The supply ratio by development site type since 2014 was compiled in fiveyear increments.
In

thethreecentralwards,

theproportionof“reconstruction”

wasapproximately 80% between 2014 and 2018, but has fallen to 40% since 2019,with the majority of development land shifting to “underutilized and unused
land (redevelopment, etc.)” On the other hand, outside the three central wards,“underutilized and unused land (redevelopment, etc.)” has continued to be themain developer since 2014.
The supply of large-scale office buildings is centered on “underutilized andunused land (redevelopment, etc.)” within and around the three central wardsof Tokyo. [Chart 3-1]
[Definition of Terms]“ Rebuilding”: The site that used to be used for offices, hotels, and houses was demolished(development in).
“Underutilized and unused land”: land that was intended for highly effective use, such as developmentof small buildings, etc., moth-eaten land with a mixture of parking lots and old buildings, dense
residential areas, former factory sites, railway sites, idle land, etc.

4. Supply Trends of Medium-sized Office Buildings
This section describes the supply trends of medium-sized office buildings witha total floor area between 5,000 ㎡ and 10,000 ㎡.
The supply of medium-sized office buildings in 2023 was 66,000 ㎡, marking
another decrease compared to 2022, when there was a large supply. Looking
at future trends, supply is expected to increase to 124,000 ㎡ in 2024, butremain small at 67,000 ㎡ in 2025. The average supply volume over the next
two years will be 96,000 ㎡, roughly equivalent to the average supply volume
over the past 10 years, and is expected to remain stable. [Chart 4-1]
Looking at the supply ratio by ward from 2024 to 2025, the ratio of the three
central wards exceeds 80%, and the ratio of the three central wards is larger
than that of large-scale offices. [Chart 4-2]
Calculating the supply volume by ward since 2020 in two-year increments andtraced the changes in the top wards in terms of supply, we found that thethree central wards have consistently accounted for more than half of thesupply. Among the three central wards, Minato Ward was the leader until 2023,
but from 2024 onwards, Chuo Ward is expected to surpass Minato Ward andbecome the largest supplier. Looking beyond Tokyo’s three central wards,
supply in Shibuya Ward continues, but supply in other wards is intermittent.
[Chart 4-3]
Looking at the supply trends for medium-size office buildings by type ofdevelopment site, the main focus in the three central wards and wards otherthan those is “Rebuilding,” which shows a trend distinct from the trend forlarge-scale office buildings, for which construction on “Underutilized andunused land” is the main category. [Chart 4-4]
Looking at the developers of medium-sized office buildings, the proportion ofmajor developers was around 30% from 2014 to 2018, but has been increasing
in recent years, rising to nearly 50% from 2024 to 2025. [Chart 4-5]
* Data showing percentages may not add up to 100% because they are rounded off to the nearest
whole number.

Reference data