Xymax Real Estate Institute (hereinafter, "Xymax REI") has conducted a survey on the increase and decrease in vacant office space, using vacancy data obtained and accumulated by the Xymax Group. This report introduces the outline of the survey. Going forward, Xymax REI plans to include future findings in its quarterly "Office Market Report - Tokyo."
The supply-demand gap of the office space market is manifest in vacancies, which are most commonly measured in the form of vacancy rates. The vacancy rate is the ratio of vacant floor space to total leasable floor space at a certain point in time. In general, a low vacancy rate means that the stock of vacant space is small and the market is robust, while a high vacancy rate indicates a large amount of vacancy and a weak market.
However, vacancy rates are, so to say, snap shots that show the supply-demand gap as of a certain point in time. When vacancy rates fall, it is difficult to determine the background of the supply and demand, such as whether the fall was due to a rise in demand on the back of a robust market or whether it was simply the result of little supply. Furthermore, a stable vacancy rate may seem to indicate an unchanging space market, but the meaning of the number will change depending on whether the rate was attributable to demand or to supply.
As shown in Figure 1, the actual office space market comprises an increase in vacant space due to: (a) tenants vacating existing properties; and (b) the supply of newly completed properties, and a decrease in vacant space due to: (c) tenants occupying vacancies of existing properties; (d) pre-leasing of newly completed properties; and, although small in number, (e) refusal of renting out vacancies. Vacancy rates are an indication of the consequence of these developments.