Fast-paced growth of flexible space in Tokyo CBD

The amount of flexible workspace in Tokyo’s office market grew sharply last year as WeWork entered the market, with new laws expected to further increase demand

February 14, 2019

Flexible workspace in Tokyo 5 wards increased to 156,000 square meters in 2018, up 48 percent from the end of 2017, according to JLL. New York-based WeWork, the largest global co-working operator, was the driving force behind the expansion, launching its Japan operation with the opening of eight locations in Tokyo’s CBD. It now operates more than 40,000 square meters of leased space in the city.

“WeWork has significantly impacted the status quo of the flexible workspace industry in Tokyo’s CBD. Demand for community-oriented shared workspaces is picking up sharply as large corporates are focused on work environments that generate innovative ideas and boost growth,” says JLL Research Tokyo, Tomoyo Nakamaru.”

Flexible workspace in Tokyo’s CBD is expected to grow 20 percent in 2019 and expansion is projected to continue into 2020.

The implementation of new reforms that address issues such as overtime, paid leave, and the extension of flexible working hours, will take effect in April 2019 and are expected to boost demand for flexible workspaces.

Japan’s workplace culture has traditionally been highly focused on long, office-based hours but Toshiro Sato, JLL’s Head of Japan Corporate Development says that’s changing.

“The new law should usher in greater productivity for businesses throughout Japan. While the office market here is still very tight, with extremely low vacancy rates, flexible space can be key to improving productivity and attracting talent.”

Recently, Goldman Sachs-managed Japan Private REIT purchased Wework Nogizaka while Norges Bank acquired The Iceberg building in iconic Omotesando area in December 2017.

Flexible Workspace on the rise

To keep up with demand, serviced offices have also started incorporating lounges and common areas while some operators in Tokyo’s CBD have even acquired external co-working brands. For example, Regus, the largest serviced office operator in the country and owner of Spaces Otemachi, recently announced a second location in Roppongi.

Domestic developers including Mitsui Fudosan, Tokyu Land Corporation, and NTT Urban Development have also launched co-working and serviced office brands. Japan’s largest domestic developer Mitsubishi Estate, operating its own brand since 2007, is scheduled to open its third Premier Floor location in February this year.

Furthermore, non-real estate developers such as Tokyu Corporation (NewWork) and JR East (Station Work) are opening satellite offices that enable tenants to work remotely. Tokyu Corporation operates four locations in Tokyo’s CBD and JR East is expected to open 30 new locations by 2020 as teleworking becomes the norm.

How do flexible real estate spaces benefit