Innovation and city growth in Tokyo

May 26, 2020 / By

Hongo is a well-known academic district with a rich literary history in Bunkyo-ku ward, Tokyo. Many educational institutions, schools and traditional universities are situated here. It is close to Chiyoda-ku ward and Ochanomizu area in the southern part and Ueno district and Akihabara area in the eastern.

Small and medium-sized buildings cluster around Hongo Sanchome station, with some situated along the main highways. Due to neighbouring university-hospitals, the demand from medical device companies has been strong. However, we observe institutions and co-working spaces for start-ups that were established in the past years. In particular, start-ups that delve in artificial intelligence (AI) products and services are concentrated here, which is why this area is also called “Hongo Valley”.

In Hongo’s Grade B office market, the monthly rents averaged JPY18,018/tsubo at the end of 1Q20. In comparison, the average monthly rents for Tokyo’s CBD Grade B office market, Shibuya area and Akihabara/Kanda area (which borders Hongo), was JPY 25,882/tsubo, JPY 32,139/tsubo and JPY 22,093/tsubo, respectively. Thus, the Hongo Grade B rents are relatively affordable for the Tokyo metropolitan area. The average rents are approximately 30% cheaper than those in Tokyo’s CBD and about 20% less than the rents for similar properties in Akihabara/Kanda. Furthermore, train travel to Hongo is only 10 minutes from Tokyo station, which is a large-scale terminal, and within 30 minutes from Shibuya and Shinjuku. Already a highly convenient location for transportation, more development is expected in the future.

Figure 1: Grade B Office Rents: Major Submarkets and Hongo

Source: JLL Research

One of the largest Japanese real estate companies, Mitsubishi Estate, has collaborated with the University of Tokyo to open a facility in Hongo to support new businesses. This facility accommodates start-ups established by graduates, researchers and students at the university. It provides free office space such as private rooms, co-working spaces and conference rooms, which are essential for start-ups. In addition to space, the facility provides services, such as business development support, educational programmes and necessary knowledge for entrepreneurs.

In particular, Mitsubishi Estate offers expertise in facility management and community building. It aims to accelerate the growth of next-generation start-ups, not only with spaces but also with value-added services. Through this support, companies may cultivate business development knowledge and skills, accelerating opportunities for innovation and for generating new businesses.

The accumulation of AI start-ups and incubation facilities is a driving force behind innovation and growth in the district. We expect the growing interest in Hongo to proactively work in terms of industry-academia partnerships for an innovative ecosystem.

Note: The Tokyo CBD includes Chiyoda-ku, Minato-ku, Chuo-ku, Shinjuku-ku and Shibuya-ku.

The Tokyo market covers this property class: Grade B – properties that meet our Grade B classification and are located in the CBD with a total GFA of 5,000 sqm or more and with a typical floor plate of 300+ sqm. The completion date for our basket of properties is later than 1982 with a building height of 8 storey or more.

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