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Office rents in Tokyo expected to fall following the Tohoku Earthquake

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Rental Value of Grade A Office Space in Tokyo

Rental Value of Grade A Office Space in Tokyo


Rental values in the Tokyo office market are expected to fall by 3-5% in 2011 as a result of the slowdown in demand caused by the deterioration in corporate profits following the Tohoku Earthquake, as well as the relocation and withdrawal of multinational companies. The earthquake has also increased awareness of the seismic compliance of buildings with companies moving to Grade A buildings with better seismic design, according to a research report by Jones Lang LaSalle, a professional services firm specializing in real estate.



On 11 March, a major earthquake and tsunami hit Eastern Japan. According to official statistics, the number of deceased had surpassed 13,000 as at 14 April. While major damages occurred in the Tohoku district, the direct damage to Greater Tokyo was limited. However, disruptions in the supply chain due to damaged production plants in the Tohoku district, as well as electricity shortages following the nuclear plant crisis in Fukushima, have impacted the economy of the entire nation. The damage generated by this major earthquake is expected to surpass that of Hanshin-Awaji Earthquake in 1995.

The earthquake was followed immediately by turmoil in the financial market, as the Nikkei 225 slid and the yen hit a record high against the dollar surging to JPY 76.25 per USD. However, with the coordinated yen intervention by G7 nations, the yen has retreated modestly against the dollar. (Figure 2). Meanwhile, despite continued volatility the steep downturn was brief and stock market analysts were quick to point out buying opportunities. The Nikkei was, at market close on 14 April, 7.5% below its level prior to 11 March.
In the meanwhile, the electricity shortages in Greater Tokyo, offline production in Tohoku and lost tourism revenues have directly impacted economic activity. Accordingly, the International Monetary Fund and Global Insight have revised their GDP growth projections for Japan, downwards for FY 2011 and upwards for FY 2012.


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