Setting Up An Office In Japan

Establishing a quality office in any city is not an easy task, but it may seem even more daunting in a large metropolitan areas such as Tokyo, Osaka and Yokohama. Since a company’s HQ is a direct reflection of their status, there are several factors to consider, including location, business identity, floor plan, building specifications, sustainability initiatives, and business continuity planning.

Read on for the top five factors to consider when it comes to establishing a new office.

1. Location, location, location

In Japan, being located near a train station is a top priority for businesses. A high majority of people commute to work by train, so being able to get from their office to a station quickly is important for employee satisfaction and recruiting ability. Anything over a 5-minute walk from the station is often a ‘deal breaker’.

Additional questions clients will consider include:
• How far is it to the office from the station on foot?
• Is it sheltered from the elements?
• Is the nearest station on a popular commuter line?
• How many line changes does an employee or client have to make?
• How much do transportation costs go up when compared with the current office location?

However, a station connecting to a minor train line will often pose a problem. The Yamanote line, as well as major Tokyo Metro railway lines, are more valuable locations because they provide easy access to the suburbs and city hubs. Popular new developments aim to offer direct access to major stations, such as Tokyo Station, which connects to 14 railway lines as well as the national bullet train network.

Locations close to industry clusters are also highly sought after. In Tokyo, financial companies cluster around the Japanese megabanks in Marunouchi and Otemachi. The area is also close to Nihonbashi, home of the Bank of Japan and Tokyo Stock Exchange. Meanwhile, Shinagawa is attractive for domestic and manufacturing firms because of its direct connections to major residential centers in Yokohama and Kawasaki, where many office workers live to escape high Tokyo rents.

Good neighborhoods build value in office space too. While Shibuya is popular with IT companies, it’s also close to trendy entertainment hotspots such as Naka-Meguro, Daikanyama and Shimo-Kitazawa.

One of the more difficult issues employers are currently facing is getting their employees back into the office as economic activities have resumed since the COVID-19 pandemic. Many firms are now adopting a hybrid work model where employees are encouraged to come into the office for several days of the week, and a convenient office location makes it more enticing for employees to do so.

Read our article here on why West Japan is an important consideration when doing business in Japan

2. Poor business identity

First impressions count. If a building is dull externally and internally, it reflects poorly on the companies housed within. A slick, modern building on the other hand will almost certainly attract higher quality tenants. Name recognition helps as well. A satisfying look of recognition on a client’s face when they notice the address can be well worth the premium rent.

Along with an attractive façade, access to high-quality business hotels, food courts and conference facilities is also ideal. Large multinationals, financial companies and professional service firms tend to gravitate towards buildings offering these services.

The COVID-19 pandemic has been kind to flexible workspaces in Tokyo CBD as they continue to gain popularity among large corporations. Previously, it was often perceived that serviced and co-working offices dented a businesses’ identity, but high demand for these spaces has led to continued development in high-end districts, both by global providers as well as Asian and Japanese providers. The need for more flexible lease terms has led to flex workspaces accounting for almost 3% of Grade A office stock, increasing their visibility in central Tokyo.

3. Outdated floor plans

Generally, it is better to have two floors of 5,000 square metres rather than 10 floors of 1,000 square metres each. The former arrangement allows for more room to put employees rather than having to double up on common services such as meeting rooms, pantries, break rooms and reception areas.

Considerations about the number, size, and placement of columns, which can cause problems for employees, could soon be a thing of the past as many developers are striving to build larger, flexible floor plates and reduce the number of interior columns all together.

More businesses are implementing open plan workspaces and employing hot-desking and touch down desks to better utilise their space. This not only encourages collaboration between team members but also reduces the cost from constructing a traditional office fit-out. Wellness spaces, such as a fitness area and nursing room, are an important consideration to ensure employee satisfaction and has garnered more importance in encouraging employees to come to the office. First aid rooms equipped with beds are a common sight as businesses continue to place a higher importance on the mental and physical well-being of their employees.

4. Limited building specifications

All businesses now have a high IT requirement and having a raised floor is essential to many operations. Certain industries, such as finance, will have a minimum raised floor requirement and will discount properties under the 100mm mark.

Ceiling height is also a critical consideration, particularly in the large span office buildings. A low ceiling can feel very oppressive for workers and limits natural light in the areas furthest away from the windows. Multinational firms will typically choose a building with a ceiling height of over 2.7m.

The number of HVAC (Heating, Ventilation and Air Conditioning) zones is equally important as many companies operate outside the standard working hours. This is typically charged additionally to the Common Area Maintenance (CAM) charge and the ability to turn off unused HVAC zones out of hours, can reduce a company’s operating costs.

The level and type of security is also important for many companies. Electronic gates and a 24-hour guard are usually expected.

In the last decade, energy saving and sustainability have emerged as another consideration. Tenants value the option of having LED lighting instead of fluorescent, which helps save on utility costs and fulfill corporate energy policies. Green initiatives are a consideration stakeholders value highly, as interest continues to grow in ESG related risks and opportunities. More participants from Japan’s real estate sector continue to acquire green certifications to pursue an advantage of enhanced reputation, and ultimately attract higher-quality tenants.

5. Little to no Business Continuity Planning

In a city prone to natural disasters like Tokyo, a building’s ability to continue business operations in the event of a disaster (known as Business Continuity Planning or BCP) is one of the most fundamental considerations. Typically, a building with good BCP specifications will offer disaster support services for tenants (such as water and supplies), enhanced earthquake resistance and an on-site power generator. For some companies, power is so vital that they will install a generator themselves.

Demand for office space in Tokyo is strong and competition for premium space can be fierce. However, companies needn’t have to compromise. The key is to identify the baseline essentials for your business, plan carefully, and enter the market early.

6. Talent Pool

Proximity to universities and research facilities could be an important factor depending on your business. Consider the availability of a workforce that you may require. If your business requires skilled labour, then choose a location where that workforce is available.

7. Future Expansion

Consider the relationship between location and your business’s growth plans.

For further enquiries, please feel free to reach out to Felicien Dumas who is a member of the JLL Office Leasing Advisory team. He is reachable by email and active on LinkedIn.

For key information on the Japanese market, please see our Doing Business page.

To find out your market potential in Japan, please get in touch.

Last updated November 2023: Steve Crane OBE