, Japan

Office spaces in Japan could be replaced by ultra luxury condos: Savills 

Selling some office floors as luxury condos instead appears to be more lucrative. 

Tokyo saw a surge of large-scale developments leading to the 2020 Tokyo Olympics, and will have more to come towards 2030. According to Savills, these large-scale, mixed-use projects will help the city’s transformation, and introduce new landmarks and city amenities. 

However, the environment surrounding the real estate market has changed significantly in recent years, which may have made some adjustments to initial project plans necessary. 

Here’s more from Savills:

Many developers have been wary about the large wave of office supply in central Tokyo behind the scenes, especially on top of the declining population of Japan. However, the reality is that the accelerated urbanisation, and increments in the working population due to higher labour participation rates of female and elderly workers have helped to fill office space. 

On the other hand, the pandemic has changed the prospects of the office sector and the concerns by developers have become more serious. In the future, it might not be as easy to fill large floors at very high office rents. 

Specifically, some office space planned for those developments in the pipeline could be excessive given the current market size and office trends. Therefore, some of that space may be replaced with other uses. 

For example, according to its original announcement, Torch Tower plans to offer about 60,000 of office space tsubo when completed in 2027. Considering that the total Grade A office stock in Chiyoda is currently about 1 million tsubo, this will be a sizable addition. The current workstyle shift toward hybrid or remote work also adds some risk to the future demand prospects for offices. 

Given the above, replacing office space with other uses such as ultra-luxury condominiums appears to be an attractive and viable option, especially given the robust demand for luxury housing. 

Since the pandemic began, people have been spending more time at home, and consequently saving more to some extent. This lifestyle change has led to heightened housing demand particularly for high-end properties, overall resulting in asset prices rising on a global level. Japan is no exemption, although the impacts of the pandemic have been relatively milder. 

Some ultra-luxury condominium units have been sold for well more than JPY20 million per tsubo, suggesting that selling some floors as ultra-luxury condominiums makes financial sense. 

For instance, the portion of Kamiyacho Trust Tower sold to Mori Trust Sogo REIT was appraised at JPY15.6 billion as of September 2021, which is about JPY14 million on a per-tsubo basis. Although offices used to be considered less risky than ultra-luxury residences, if the ultra-luxury market continues to grow and mature, more developers are likely to start considering them as essential components of their projects. 

Furthermore, the ultra-luxury residential market will also help other relevant sectors that cater to UHNWIs, such as retail and hotels.


Follow the links for more news on

Join Realestate Asia community
Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!