Mori unveils Tokyo's tallest office tower, testing post-COVID demand

Japan's Mori Building unveiled Tokyo's tallest office tower on Tuesday, part of a sprawling business and residential complex that aims to capitalize on an investment boom in the world's third-biggest economy.

At 330 meters, the Mori JP Tower anchoring the Azabudai Hills project is just slightly shorter than the iconic orange and white Tokyo Tower nearby. Due to open in November, the Mori JP Tower will have offices for about 20,000 workers and accommodations for 3,500 residents.

The project comes as new apartment prices climb to record highs in Japan's capital and the Nikkei stock indicator hovers near a three-decade high. But the new tower will test an uncertain market for office space, as some companies downsize in the post-COVID era and employees continue to work from home.

Mori Building Chief Executive Shingo Tsuji acknowledged that the pandemic had changed work patterns, but insisted that offices that combined retail and cultural attractions would remain attractive.

"I don't believe all work can be done remotely, especially when it comes to generating ideas, nurturing talent, and creating new business and company culture," Tsuji told reporters. "As long as Tokyo continues to grow, the office space itself has to increase."

Mori Building has reshaped the Tokyo skyline over the past two decades with multiple skyscrapers and complexes that combined offices with shops, residential spaces, and cultural centers.

Tsuji repeated a philosophy from deceased company founder Minoru Mori that Tokyo needed radical urban development to remain competitive with other global cities.

But recent projects have faced opposition from community groups who say they threaten to erase historical spaces and architecture. Thousands of baseball fans have signed a petition to save Tokyo's Meiji Jingu Stadium, compared to U.S. baseball venues Wrigley Field and Fenway Park, that is slated to be torn down and rebuilt.

About 50% of the Azabudai Hills office space has been leased so far, and about half of that to non-Japanese parties, Tsuji said. The company is aiming for a full house by the end of 2023.

But occupancy rates and rents in Tokyo's top-grade buildings ticked down in the first quarter as supply increased, according to property consultancy Jones Lang Lasalle (JLL). And mortgage rates for homes and condos are poised to climb as the Bank of Japan begins to allow interest rates to drift higher.

Some buildings are taking longer to get to full occupancy in the current environment, but huge developments are benefiting from a "flight to quality" as companies seek to improve employee engagement, said JLL research director, Koji Naito.

"I believe this kind of movement might be seen in the future, and this might be an underpin for the mega projects," he added.

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