Osaka Office: Counter-attack of Midosuji

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Osaka Office: Counter-attack of Midosuji

March 24, 2020 / By Tomomi Kemmochi

The vacancy rate of Osaka Grade A office market stood at 0.14% in 4Q19, and the annual rental growth exceeded 10% for the seventh consecutive quarter[1]. In addition to lower vacancy rate in the largest business district Umeda, the expected increase in office space demand with the development of the Bay Area for 2025 Expo and the possible integrated resort (IR), has led to rental growth throughout the Osaka CBD. Now, we expect the resurgence of the traditional business district Midosuji.

Having the highest rents, the Umeda district spreads around JR Osaka Station, the largest terminal station in western Japan. Its status as a business district was enhanced around 2013 with the completion of multi-purpose building complex Grand Front Osaka, as part of the Umekita Phase 1 Development Project at the north side of Osaka Station. Furthermore, the Osaka Umeda Twin Towers South on the south side of Osaka Station will be completed in 2022, which should become a market leader in the Osaka office market. There are plans for other large-scale developments as well, including the Umeda 3-Chome Project in 2024 and the Umekita Phase 2 Development Project after 2024.

The Nakanoshima district, with second-highest rents, is an island located between the Umeda and Midosuji districts. The district has long been the economic, cultural and administrative centre of Osaka, with the Osaka City Hall, Bank of Japan Osaka Branch and others in the east, and the Osaka Prefectural Convention Centre, National Museum of Art and others in the west. Its status as a business district was further enhanced with the completion of Nakanoshima Festival Towers in 2012 and 2017. International business is expected to expand with the completion of projects including Multi-LinkS – an international hub for medical innovation, in 2023.

The Midosuji district, which has the third-highest rents, is a traditional business district centred on Midosuji, the main artery of Osaka connecting Umeda in the north and Namba in the south. Large companies, including banks and life insurance firms, are located here. But most of their office buildings are mid-sized because of building height restrictions, which eased from 31m to 50m in 1995.

In 2002, the government enforced the Act on Special Measures Concerning Urban Renaissance, after which a few districts along Midosuji were designated as special urban renaissance districts. This enabled the completion of 70-metre-high Yodoyabashi Mitsui Building in 2008 and 130-metre-high Hommachi Garden City in 2010. Then, the Midosuji Design Guidelines implemented by Osaka City in 2014 led to the completion of 116-metre-high OBIC Midosuji Building in January 2020. In 2024 and 2025, high-rise office buildings are scheduled to be completed above Yodoyabashi Station as part of the Urban Redevelopment Project and the Urban Reconstruction Project, respectively.

The ease of building height restrictions and the increase in office demand have driven several redevelopment projects of office buildings in the Midosuji district, other than the above mentioned Yodoyabashi projects. Long overshadowed by Umeda and Nakanoshima, Midosuji is now staging a comeback.

Figure 1: Osaka Grade A Office: Supply, Vacancy Rate and Rents