Japan Office Real Estate Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Japan office real estate market is segmented by Sector (Information Technology (IT and ITES), Manufacturing, BFSI (Banking, Financial Services, and Insurance), Consulting, and Other Services). The report offers market size and forecasts for the Japan office real estate market in value (USD Billion) for all the above segments.

Market Snapshot

Japan Office Real Estate Market - Market Summary
Study Period: 2018-2027
Base Year: 2021
CAGR: >4 %

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Market Overview

The Japan office real estate market is expected to grow at a CAGR of over 4% during the forecast period.

In Japan, the COVID-19 pandemic has sparked dramatic shifts in workplace working practices and locations. In reaction to the pandemic, roughly 60% introduced remote working. In the office market, the number of relocations or new openings are placed on hold, delayed, or canceled due to the impact of pandemic. In October 2021, about 37% of companies used remote work for employees.

The Grade A office vacancy rate is predicted to climb through 2022, with a forecast of roughly 2%.  Simultaneously, roughly 190,000 tsubo (6,28,900 square meters) of new Grade A office space is expected to be delivered in 2023, making it the second-highest total in history after 2018. The Grade A vacancy rate is expected to reach 3.5% in Q4 2023, up 2.3 percentage points from Q4 2020.

As the economy progressively improves, it is predicted that the office demand in regional cities to peak in 2022 or 2023, depending on the city. In most regional cities, vacancy rates should begin to drop in 2022. The rate of increase, on the other hand, is likely to be determined by the amount of new supply. In comparison to other cities, the quantity of additional office space anticipated for completion over the next three years in Yokohama, Kanazawa, and Fukuoka is higher.

Scope of the Report

Office real estate is the construction of buildings for leasing and selling purposes to companies from different sectors. This report aims to provide a detailed analysis of the Japan office real estate market. It focuses on the office real estate sector's market insights, dynamics, technological trends, and government initiatives. The Japan office real estate market is segmented by Sector (Information Technology (IT and ITES), Manufacturing, BFSI (Banking, Financial Services, and Insurance), Consulting, and Other Services). The report offers market size and forecasts for the Japan office real estate market in value (USD Billion) for all the above segments.

By Sector
Information Technology (IT and ITES)
Manufacturing
BFSI (Banking, Financial Services, and Insurance)
Consulting
Other Services

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Key Market Trends

Rise in Start-ups Driving the Market

Japan is lagging far behind the rest of the world in nurturing start-ups. As of 2021, Japan has only 6 Unicorns. This is even fewer than the 41 in India and 11 in South Korea. In 2020, JPY 16.6 trillion (USD 136.1 billion) was invested in start-ups in the United States, as opposed to only JPY 150 billion (USD 1.2 billion) in Japan, a 110-fold disparity.

In 2021, SmartNews, Inc. topped the list of leading start-ups in Japan in terms of money raised, with a total of USD 228.78 million raised. Mobility Technologies Co., Ltd. came in second with a total of USD 159.93 million in investment.

In recent years, the number of university-based companies in Japan has steadily expanded, with an estimated 2.9 thousand such startups in the fiscal year 2020. In recent years, the number of newly founded university-based companies has also increased.

In 2022, the government plans to introduce a framework to provide financial support for large companies when they hire people who plan to later start businesses, and for start-ups that ask to borrow human resources from large companies.

Japan Office Real Estate Market - Driving Factor Trend

Growth in Data Centre Industry Driving the Market

In the APAC region, Japan has a mature data centre industry with a strong presence as a corporate hub and global financial centre. It is a technological, robotics, and machine learning leader, in addition to being economically progressive. Over 22 third-party data centre service providers operate over 90 facilities in the country. In addition, local businesses own a number of on-premise or dedicated data centres in the country. Because of its strategic location, Japan is one of the most important connectivity hubs.

The demand for all flash storage devices is likely to rise as investors expand their investments in start-ups such as FinTech and e-commerce that use big data analytics and IoT applications. Because of the COVID-19 epidemic, the rise in digital transformation and enterprise adoption of cloud computing is expected to enhance cloud server adoption in Japan.

In 2020, Tokyo and Osaka were major data centre investment destinations. Other regions such as Kobe, Nagoya, and Yokohama are expected to grow during the forecast period. The cloud market in Japan was around USD 10 billion in 2020, including private and public clouds, which is expected to be valued at over USD 16 billion by 2023.

Japan has a strong presence of regional data center providers. It is one of the fastest-growing digital markets in the world. Japan has evolved into an international data center market driven by global hyperscale cloud providers such as Amazon Web Services (AWS), Google, Microsoft Azure, and IBM, expanding in the Tokyo and Osaka regions.

Japan Office Real Estate Market - Driving Factor Trend

Competitive Landscape

The Japan office real estate market is highly fragmented with the presence of both global players and regional players and the competition in the market is very high. Some of the major players like Mitsui Fudosan, Mitsubishi Estate, Sumitomo Realty & Development, Tokyu Land Corporation, etc. The market is anticipated to regain normalcy by the end of 2022. Companies are gearing up to meet future needs, and many companies are entering the market for further opportunities.

Recent Development

February 2022: Hulic (a real estate company) signed a Purchase Agreement with Japan Excellent (a real estate investment trust, which mainly invests in office buildings in Tokyo) to buy Trust Beneficiary Rights in Shintomicho Building for JPY 3.1 billion (USD 25.4 million). The Trust Beneficiary Rights in the Shintomicho Building will be transferred in two parts, with the first phase being the transfer of 40% ownership for JPY 1,24 billion (USD 10.1 million) and the second phase involving the transfer of the remaining 60% ownership for JPY 1.86 billion (USD 15.3 million). The first phase is expected to be completed on July 22, 2022.

December 2021: CPP Investments (a Canadian Crown corporation) announced a JPY 19 billion (USD 155.8 million) commitment to a joint venture with Mitsubishi Estate Co(a renowned Japanese real estate developer), to pursue investments in commercial assets in Japan. Mitsubishi Jisho Investment Advisors, a wholly-owned subsidiary of Mitsubishi Estate and one of Japan's leading real estate fund managers with assets under management totaling JPY 920.1 billion (USD 7.5 billion), would oversee the joint venture.

Table of Contents

  1. 1. INTRODUCTION

    1. 1.1 Study Deliverables

    2. 1.2 Study Assumptions

    3. 1.3 Scope of the Study

  2. 2. RESEARCH METHODOLOGY

    1. 2.1 Analysis Methodology

    2. 2.2 Research Phases

  3. 3. EXECUTIVE SUMMARY

  4. 4. MARKET INSIGHTS

    1. 4.1 Current Market Scenario

    2. 4.2 Government Regulations and Initiatives in the Industry

    3. 4.3 Industry Value Chain Analysis

    4. 4.4 Technological Innovations in the Office Real Estate Market

    5. 4.5 Insights into Rental Yields in the Office Real Estate Segment

    6. 4.6 Insights into the Key Office Real Estate Industry Metrics (Supply, Rentals, Prices, Occupancy (%)/Vacancy (%))

    7. 4.7 Insights into Office Real Estate Construction Costs

    8. 4.8 Insights into Office Real Estate Investment

    9. 4.9 Impact of COVID-19 on the Market

  5. 5. MARKET DYNAMICS

    1. 5.1 Market Drivers

    2. 5.2 Market Restraints/Challenges

    3. 5.3 Market Opportunities

    4. 5.4 Industry Attractiveness - Porter's Five Forces Analysis

      1. 5.4.1 Threat of New Entrants

      2. 5.4.2 Bargaining Power of Buyers/Consumers

      3. 5.4.3 Bargaining Power of Suppliers

      4. 5.4.4 Threat of Substitute Products

      5. 5.4.5 Intensity of Competitive Rivalry

  6. 6. MARKET SEGMENTATION

    1. 6.1 By Sector

      1. 6.1.1 Information Technology (IT and ITES)

      2. 6.1.2 Manufacturing

      3. 6.1.3 BFSI (Banking, Financial Services, and Insurance)

      4. 6.1.4 Consulting

      5. 6.1.5 Other Services

  7. 7. COMPETITIVE LANDSCAPE

    1. 7.1 Overview (Market Concentration Analysis and Major Player)

    2. 7.2 Company Profiles

      1. 7.2.1 Mitsui Fudosan

      2. 7.2.2 Mitsubishi Estate Co

      3. 7.2.3 Sumitomo Realty & Development

      4. 7.2.4 Tokyu Land Corporation

      5. 7.2.5 Nomura Real Estate Holdings

      6. 7.2.6 Hulic

      7. 7.2.7 Tokyo Tatemono

      8. 7.2.8 Mori Trust

      9. 7.2.9 Mori Building

      10. 7.2.10 Nakano Corporation*

    3. *List Not Exhaustive
  8. 8. FUTURE OF THE MARKET

  9. 9. APPENDIX

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Frequently Asked Questions

The Japan Office Real Estate Market market is studied from 2018 - 2027.

The Japan Office Real Estate Market is growing at a CAGR of >4% over the next 5 years.

Mitsui Fudosan, Mitsubishi Estate, Sumitomo Realty & Development, Tokyu Land Corporation, Nomura Real Estate Holdings are the major companies operating in Japan Office Real Estate Market.

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