Office Investment Risks in Tokyo and Other Cities-Asking Office Rents Contradict Cap Rates-
金融研究部 主任研究員 増宮 守
- Property prices in Tokyo are much higher than in other cities. Tokyo’s high property prices are sustained not only by expensive office rents, but also low Cap Rates.
- On the other hand, common perceptions in the office leasing market are different. Actually, the volatility of asking office rents in Tokyo is apparently higher than those in other cities, which contradicts the risk profile indicated by Cap Rates.
- Contracted office rents and profitability analysis, however, reveal sizable risks in local cities not recognized from asking rents, and confirm the relatively low-risk profile of Tokyo. As a great number of companies are based in Tokyo, qualitative factors may also justify the relatively low-risk profile, such as acceptable liquidity both in the leasing and investment markets, which cannot be easily expected in local cities.