TOKYO, JAPAN - JAPAN'S leading estate firms, including Mitsui Fudosan, have begun proposing big rent rises in central Tokyo, where office vacancy rates have been hovering near 20-year lows.
These rock-bottom vacancy rates have helped Mitsui Fudosan and rival Mitsubishi Estate weather tougher times for much of Japan's property market, which has been hit by tighter credit and stricter apartment building codes.
Mitsui Fudosan, Japan's largest real estate developer, said yesterday that it is in talks with tenants to raise office rents in central Tokyo by an average 10 to 15 per cent.
The country's second-largest, Mitsubishi Estate, also said it is in talks with tenants to raise office rents in the Marunouchi area of central Tokyo by 15 to 20 per cent.
Another major developer, unlisted Mori Trust, said it is preparing to raise office rents in central Tokyo's Minato district by an average of 20 per cent.
The office vacancy rate in Tokyo's 23 wards stood at 2.1 per cent last month - the lowest since the burst of Japan's asset-inflated bubble economy in 1990, according to Ikoma Data Service System, a research firm specialising in the market for office buildings.
Average rent in Tokyo's five central wards last month was about 15,120 yen (S$198.1) per 3.3 sq m. That marks a 12 per cent increase from 13,530 yen in June of last year, according to the most recently available data from Ikoma.
'Tokyo's office market is extremely tight,' said Ikoma researcher Mitsuhiro Asada.
'With signs of an economic recovery, many companies started hiring more people, and that's making them want to move to bigger offices,' he said. He added that such conditions would likely last for a while, helping real estate firms' businesses.
Mitsubishi Estate said it is seeking the rent increase given the tight office market situation in the Marunouchi area. It said its vacancy rate in that district was just 0.19 per cent as at the end of March, the lowest since it started disclosing the data in 2003.
Shares of Mitsui Fudosan tumbled 3.8 per cent to 2,440 yen and those of Mitsubishi Estate lost 2.2 per cent to 2,690 yen as of the midday break yesterday. --REUTERS
