● In the October–December 2018 quarter, the Tokyo 23 Ward’s office market saw a continued drop in the vacancy rate on the back of tight supply and demand as many companies sought office space as part of their efforts to strengthen recruitment. Tenants’ demand for offices was strong, with vacancies that arose when companies relocated being filled before going on the market. New contract rent has remained on a rising trend accordingly.
● The vacancy rate was 1.71%, down 0.30 points from the previous quarter. The decrease in vacant space continued to exceed the increase, with vacant space decreasing by 201,000 tsubo and increasing by 165,000 tsubo. The vacancy turnover ratio, which is the percentage of vacant space leased during the quarter to the overall vacancy stock, rose by 3.6 points to 49.7%, a rise for the seventh consecutive quarter and indicating an acceleration in the pace at which vacancies are filled.
● The new contract rent index, the level of new lease rent, rose by 1 point quarter on quarter to 123. Although the rise has moderated compared to Q3, the index is still on a rising trend. The contract rent diffusion index, calculated by subtracting the percentage of buildings with a rent decrease from that of buildings with a rent increase, remained above zero for the fifteenth consecutive quarter at +23.
● The paying rent index, which is the level of new lease rent and that of existing lease rent combined, was unchanged from the previous quarter at 91.
● The average free rent months of lease with free rent was 1.5 months, and the ratio of free rent granted was 51.0%, accounting for a majority, indicating that free rent has become common in the market.