The “2012 Problem” of over-supply

Not only are residential apartments expected to flood the market in 2012, but the supply of new office space is also expected to reach record high levels.

This year, the supply of office space in central Tokyo is expected to reach the third highest level since the bubble economy in the late 1980s. Although construction companies are seeing brisk business, office vacancy rates continue to rise and we are entering into what the real estate industry is calling the “2012 problem”. Department stores are facing similar conditions with an oversupply of under-performing branch stores.

The business center of Japan – Otemachi in Tokyo – is seeing a flurry of activity. Tokyo Tatemono and Taisei Corporation are continuing full-steam ahead with the “Otemachi 1-6 Project.”  The project is replacing the Mizuho Bank Otemachi Head Office Building and the Otemachi Financial Center. Completion of the new 38-storey building, a multi-use tower with office, hotel and retail space, is expected in 2014.

Other activity around Tokyo Station includes the restoration to the old station building itself, Mitsubishi Estate’s “Marunouchi 1-4 Project” and the “Otemachi 1 Chome No. 2 Urban Area Redevelopment Project.” New development in the area is expected to be in the region of tens of billions of Yen.

According to Mori Building, the total office floorspace expected to hit the market this year is 1,540,000 sqm (16,570,400 sqft), up 12% from 2011. A survey by Miki Shoji has found that the office vacancy rates in November, 2011, rose above 9%, which is far higher than the standard criterion of 5%.

New office space to be available in 2012 (data from Mori Building):

 Building Name Total area (sqm) Location
 Marunouchi 1-4 Project 139,800 Marunouchi
 Shibuya Hikarie 144,177 Shibuya
 JP Tower 212,000 Marunouchi
 Shinjuku East Side Square 170,300 Shinjuku
 Nakano Central Park South 151,577 Nakano
 Toranomon-Roppongi Area Project 143,550 Roppongi and Toranomon
 Nakano Central Park East 39,025 Nakano
 DiverCity Tokyo 64,880 Aomi

Source: The Asahi Shimbun, January 5, 2012.