Survey of Large Office Building Supply in the 23 wards of '08 April 11, 2008

We, Mori Trust Co., Ltd. (Head Office: Minato-ku, Tokyo), have since 1986 undertaken continuous field surveys and interviews concerning the implementation of plans for large-scale office building projects (total floor area: 10,000 square meters) within the 23 wards of Tokyo. Results of the most recent surveys and analysis are presented below. In the calculation of total office floor area, where the survey deals with multi-purpose buildings—buildings coupled with stores, living quarters or residences, hotels, etc.—only the floor area purely for office use is taken into consideration. [Survey Date: December 2007]

Office supply approaches a turning point -Supply hits a low level in 2008, and central Tokyo’s share of supply falls as well-

Main Results of This Survey

1. Changes in Supply Volume: Annual supply projected to average 710,000 square meters over the next four years, reflecting a

rapid fall to 60% of the level of supply over the past four0.00.20.40.60.81.0 years In 2008, supply is projected to total 670,000 square meters, roughly one-half the 2007 level of 1,190,000 square meters. In addition, supply is projected to average only 710,000 square meters/year over the period 2008–2011 — a level less than 60% that of actual supply (1.2 million square meters/year) over the period 2004–2007. The year 2008 marks a turning point away from the trend toward high supply that had begun around 2002, and supply appears likely to remain at very low levels over the next few years. As for the average office area of each building, the upsizing trend has reversed – from 43,000 square meters (2004–2007) to a projected 36,000 square meters (2008–2011).

2. Trends in Supply Location: Share of supply of the three central wards of Tokyo to fall to the 50% range over the coming four years, with a rapid decrease in the number of large-scale development projects in central Tokyo. A look at supply locations over the period 2008–2011 shows that the share of supply accounted for by locations in the three central wards of Tokyo will fall substantially, from 75% of supply (over the period 2004–2007) to 57%. This phenomenon results from the fact that the recent very large-scale redevelopment projects on former National Railway or public land, such as those in , , and Konan, were mostly completed by 2007 and the volume of such development on underutilized and unused land such as these sites in central Tokyo is set to decrease dramatically. A look at supply by business district shows that while the Otemachi--Yurakucho area remains the center of supply, districts with the next-highest levels of supply are those such as Nishi-, Osaki/, and , outside the three central wards.

3. Trends by Development Site: Rebuilding projects’ share of supply in the three central wards of Tokyo to surpass 80% over the years 2008–2011 A look at supply trends by development site over the period 2008–2011 shows that rebuilding sites account for more than 80% of development in the three central wards of Tokyo, a clear indication that the leveling off of development of underutilized and unused land in these wards has resulted in a shift to a supply structure made up primarily of rebuilding. At the same time, outside the three central wards of Tokyo 80% of supply consists of development of underutilized and unused land, implying that the booming office market has led to the steady advancement of redevelopment projects and of putting unused land to more efficient use.

For further information, please contact:

Research & Planning Yuji Iwata 1/7 Building Leasing Department1 Mori Trust Co., Ltd. http://www.mori-trust.co.jp Toranomon 2-chome Tower, 3-17 Toranomon 2-Chome, Minato-ku, Tokyo 105-0001 JAPAN Tel: +81-3-5511-2434 / Fax: +81-3-5511-2409 E-Mail: [email protected] Future Market Outlook

In 2008, the office-supply trend in Tokyo is shifting in orientation from a trend toward large-scale supply centralized in central Tokyo to one toward low levels of supply dispersed over numerous locations. Behind this shift is the drying up of sites for large-scale development in central Tokyo and the resulting supply structure focused on rebuilding. With the recent successive completion of large-scale development projects, the renewal of the central-city functions—which had been progressing rapidly—is likely to slow down somewhat over the coming several years.

At the same time, it would be difficult to characterize central Tokyo, home to a concentration of core global business facilities, as having an adequate supply of high-spec, large-scale buildings able to satisfy the needs of these global firms. Office buildings completed since 2000 that can be viewed as having suitably high specifications still account for only just over 10% of total office stock in the three central wards of Tokyo. As such, the renewal of the central-city functions has only just begun. As competition between cities intensifies on a global basis, large-scale redevelopment in the central city is indispensable to further improving the international competitive strengths of the Tokyo brand in the future. These times thus inarguably require the adoption of innovative measures in support of such efforts.

To this end, the swift implementation of an urban revitalization project decided on in June of last year, named “The promotion of urban revitalization for the enhancement of international financial base functions”, is eagerly anticipated. However, in order to improve the international competitive strengths of the Tokyo market we must strongly promote the development of an urban environment in which global firms, including financial institutions from Japan and overseas, can operate with comfort and peace of mind. Accordingly, many are eagerly awaiting the timely adoption of dynamic innovations, such as new means of urban development that go beyond the bounds of existing frameworks.

2/7 Figure 1: Trends in supply volume of large-scale office buildings in the 23 wards of Tokyo

Key Completed supply Incomplete supply under construction Incomplete supply not yet under construction Supply quantity

(Buildings) 49 50 46 47 43 41 40 37 40 36 33 33 29 29 27 27 30 23 25 24 23 22 20 23 20 17 16 12 14 Supply quantity （10,000 ㎡） 7 10 250 2004 - 2007 average supply: 221 1,200,000 ㎡ / year 0

200 1986 - 2007average supply: 2008 - 2011 average supply: 1,060,000 ㎡ / year 183 710,000 ㎡ / year 162 150

118 119 114 118 119 118 Supply volume 100 108 104 99 100 92 89 83 82 81 80 74 72 67 56 55 55 50 36

0 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

60 61 38 40 32 32 38 27 25 23 22 19 21 20 15 17 17 12 11 13 11 9 13 11 10 8 9 6 7 0 Supply volume (own buildings)

Figure 2: Trends in average total office floor area per building (four-year intervals)

㎡ 46,000 / building 43,000 ㎡ / building 38,000 ㎡ / building 36,000 ㎡ / building 30,000 ㎡ / building 26,000 ㎡ / building

（1988-1991） (1992-1995） (1996-1999） （2000-2003） （2004-2007） （2008-2011）

3/7 Figure 3: Large-scale office supply volume in the 23 wards of Tokyo and individual key business districts (2008 - 2011)

〔23 wards〕 〔Business districts〕

Three central wards 57％ Other 16 wards Oshiage

Koto ward 10% 12% Chiyoda ward ・ Jinbocho・ Shinagawa 34% Nishi-Shinjuku Ogawamachi ward 9% Koraku ・ ward Bancho Suitengumae 10% Hirakawacho Otemachi・Marunouchi 2% 7% ・Yurakucho 16% 650,000㎡ ・ Muromachi Shinjuku ward ･ Chuo ward Akasaka Nagatacho Minato ward Aoyama Toyocho Roppongi Supply volume

Toyosu Chiyoda ward 950,000 ㎡ Shibuya Harumi Ikejiri-Ohashi Hamamatsucho Chuo ward 190,000 ㎡ Hiroo Shinkiba

Minato ward 460,000 ㎡ Ebisu Approx. supply volume Shinjuku ward 280,000 ㎡ ：400,000 ㎡ ～ Shibuya ward 50,000 ㎡ Shinagawa Meguro (Konan) ：200,000 ㎡ Shinagawa ward 260,000 ㎡ Rinkai ～ 400,000 ㎡ Osaki ：100,000 ㎡ ㎡ Gotanda Koto ward 350,000 ～ 200,000 ㎡ ㎡ 280,000 ㎡ Higashi-Shinagawa ： 10,000 Other 16 wards ～ 100,000 ㎡

Figure 4: Trends in the top 10 districts in terms of large-scale office supply volume (2008 - 2011)

(10,000 ㎡) 50 K e y 2008 40 2009 2010 30 2011

20 Supply volume 10

0 Otemachi Nihonbashi Akasaka Bancho Konan Iidabashi Nishi-Shinjuku Osaki Toyosu Rinkai Marunouchi Muromachi Hirakawacho Koraku Gotanda Yurakucho

4/7 Figure 5: Large-scale office supply volume in the 23 wards of Tokyo and individual key business districts (2004 - 2007)

〔23 wards〕 〔Business districts〕

Ikebukuro Other 16 wards Three central 4% wards Koto ward 75％ Shinagawa ward

Shibuya 10% ward 2% Akihabara Kinshicho 9% Chiyoda ward Jinbocho Uchi- 34% Iidabashi ・ kanda Shinjuku ・kudan Ogawamachi ward 3-chome 0.2% Hamacho Bancho Minato ward ・Kojimachi Otemachi・Marunouchi 8% ・Yurakucho Nihonbashi・Kyobashi 33% ・ 990,000㎡ Muromachi

Kasumigaseki･ Chuo ward Uchisaiwaicho Akasaka Ginza Toranomon Toyocho Roppongi Aoyama Shiodome ・Monzen-nakacho Supply volume 670,000㎡

1,650,000 ㎡ Harumi Toyosu Chiyoda ward Shibuya Hamamatsucho

Chuo ward 380,000 ㎡ Shinkiba Shirogane Tamachi ㎡ Ebisu Minato ward 1,570,000 Approx. supply volume

Shinjuku ward 10,000 ㎡ ：400,000 ㎡ ～ Shibuya ward 80,000 ㎡ Shinagawa(Konan) ㎡ 750,000㎡ Rinkai ：200,000 Shinagawa ward 440,000 ㎡ ～ 400,000 ㎡ Osaki ：100,000 ㎡ Koto ward 500,000 ㎡ Gotanda ㎡ Higashi ～ 200,000 -Shinagawa ㎡ 190,000 ㎡ ： 10,000 Other 16 wards ～ 100,000 ㎡

5/7 Figure 6: Percentages of large-scale office supply volume by site type (2008 - 2011)

〔Three central wards〕 〔Other districts〕

Former Japan Others: ㎡ National Railway site: 120,000 80,000 ㎡ (5%) (7%)

Redevelopment project: 60,000 ㎡ (4%) Rebuilding: 240,000 ㎡ Underutilized or unused site: (20%) 260,000 ㎡ (16%) Others: 620,000 ㎡ Rebuilding: (50%) 1,340,000 ㎡ Redevelopment (84%) project: 370,000 ㎡ (30%) Underutilized or unused site: 990,000 ㎡ (80%)

Figure 7: Supply volume by site type of the top 10 districts in terms of large-scale office supply volume

(10,000 ㎡) 70 K e y Rebuilding 60 Redevelopment project Former Japan 50 National Railway site Other underutilized or unused site 40

30 Supply volume

20

10

0 Otemachi Nihonbashi Akasaka Bancho Konan Iidabashi Nishi-Shinjuku Osaki Toyosu Rinkai Marunouchi Muromachi Hirakawacho Koraku Gotanda Yurakucho

[Definition of terms]

Rebuilding: (Developments taking place on) land resulting from the demolition of buildings previously used as offices, hotels, residences, etc.

Underutilized and unused site: (Developments taking place on) land not previously used effectively, including land with intermixed parking lots, dilapidated buildings, and a number of empty lots, concentrated residential-use land, former factories, former railway land, etc.

Redevelopment project: A redevelopment project carried out by a redevelopment association or Tokyo Metropolitan Government.

6/7 Figure 8: Supply trends in three central wards of Tokyo and other districts

〔Large-scale office supply〕

(10,000 ㎡) 400 Key ㎡ 3,600,000 Rebuilding Underutilized and unused site 300 148 （41％）

200 1,600,000㎡ ㎡ 26 （16％） 1,220,000㎡ 1,230,000 100 212 （59％） 134 （84％） 112 （92％） 99 （80％）

（8％） 24 （20％） 0 10 2004-2007 2008-2011 2004-2007 2008-2011

Three central wards Other districts

〔Average office floor area per building〕

54,000㎡ /building 45,000㎡ 37,000㎡ 38,000㎡ /building 33,000㎡ 35,000㎡ /building /building /building /building （2000-2003)（2004-2007)（2008-2011) （2000-2003)（2004-2007)（2008-2011)

Three central wards Other districts

Figure 9: Shares of office stock by year of completion of office construction*

2000-2005 2000-2005 11% 4%

1979 or earlier 1990s 1979 or earlier 31% 23% 1990s 45% 45%

1980s 1980s 21% 20%

Three central wards Other districts

* The data above was prepared by Mori Trust Co., Ltd. based on office floor area (including bank floor area) figures included in Tokyo no Tochi 2006 (“Tokyo Land 2006”), published by the Tokyo Metropolitan Government.

The above graphs assume that the increase in supply volume in each year equals the office floor area of buildings completed in that year and depict shares by decade calculated using total office stock as of January 1, 2006 as the denominator.

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