The expansion of flexible workspace in central Tokyo

A shift in tenant preferences boosts further expansion of flexible workspaces in central Tokyo

February 27, 2023

Flexible workspace in central Tokyo continues to expand in the first quarter of 2023 as hybrid work is implemented widely, particularly among large corporates. More demand for flex space from employees working from home or conducting remote work from locations other than corporate headquarters is more frequently seen since the onset of COVID-19 and the need for agile workspaces from workers who are increasingly mobile is driving the expansion of flex space.

Additionally, low initial set-up costs, move-in ready features, and flexibility in terms and conditions compared to traditional leases are generating demand for corporate headquarters, satellite office, and short-term project use.

As per the latest JLL Japan’s research report, “Flexible Workspace in Tokyo CBD Expands as Hybrid Work Lifts Demand”, the total stock of flexible workspace in Tokyo CBD is estimated at 421,457 sqm as of the end of last September.

Approximately 60% of the total stock of flexible workspaces in central Tokyo is coworking office since community-oriented workspaces are viewed as conducive to collaboration and communication among workers, which is increasingly important as remote work picks up.

Since the release of the flexible workspace paper in Japan last December, several locations have opened in central Tokyo during the first quarter of 2023. For example, global coworking operator WeWork opened a new location in Shinagawa in January, adding to its extensive network of more than 30 locations. Singapore-based coworking operator Justco also launched two locations in Grade A offices and is expected to open another this month and serviced office operator Servcorp also added a new location in Yanmar Tokyo Building last month.

Domestic operators are also turning increasingly favourable to more flexible arrangements of workspace. Last December, the Japan franchise of IWG, which operates several brands including Regus, Spaces, and Signature in Japan, was acquired by Mitsubishi Estate, one of the major developers in Japan.

Also, Tokyu Fudosan is expected to launch more locations of its coworking brand Business-Airport and Nomura Fudosan is scheduled to expand its serviced office network of Human First Office over the next several years.

Furthermore, as vacancy in Tokyo Grade A office is expected to increase in 2023, more opportunities for flex operators to enter into prime offices will be seen. While in the short-term, the share of flexible workspace in central Tokyo that occupied Grade A office has fallen slightly in the first quarter of 2023, the pick-up in supply could lead to future opportunities in the long-term.

And finally, workstyle reforms enforced by the government are also driving demand as work-life balance, and corporate culture and well-being are in focus. Eventually, worker preference is likely to become one of the key differentiating factors in hiring and retaining high-quality talent and a motivated workforce.

Figure 1: Flexible workspace (Serviced Office vs Coworking Office) in Central Tokyo (as of September 2022)

Source: JLL