Tokyo Data Centres 1H/2020

Emerging from a (Soft) Lockdown

Since early April, Japan’s top metropolitan areas have been under a state of emergency – marked by partial business closures and advice to avoid unnecessary outings. Indeed, Tokyo’s lockdown is little more than a government recommendation, carrying no legal weight.

Even so, residents and businesses are generally abiding by the Metropolitan Government’s guidelines. A full lockdown has been avoided, but the damage is clear and will likely continue for some time after the state of emergency is lifted in late May and the pandemic comes under some measure of control. Inbound tourism has been an important demand catalyst for the hospitality and retail sectors, and overseas visitors are unlikely to return anytime soon. The residential and logistics sectors, on the other hand, appear to be among the most poised to weather the pandemic and its aftermath. 

Although we can do little more than speculate as to what Tokyo’s “new normal” will look like post-pandemic, workstyles are likely to change. As such, the office sector, while likely to fare much better than hospitality and retail, arguably has a more uncertain future than before. Companies may look to reduce their headcount at offices in Tokyo’s central five wards, favouring teleworking and satellite offices - a reversal of the consolidation trend observed over the past several years.

On the other hand, in keeping with some form of social distancing, firms may seek to increase the amount of office space per employee and, as a result, requirements for floor space in the CBD may not drop significantly. With all asset types likely to undergo a transition of some form, emerging sectors with growing demand such as data centres and healthcare facilities should have their moment in the sun.