Tokyo's Hot Office Market
Collides With History

Tokyo's ferocious appetite for modern towers has bumped up against a piece of Japanese history, sparking an examination of the cultural costs of the city's sizzling office market.

Japan Post, the country's mail carrier, is planning to redevelop property containing the Tokyo Central Post Office, prominently located near the city's busy Tokyo Station in a ritzy area known as the Marunouchi District, says Carl D'Silva, a principal architect on the project with the firm of Murphy/Jahn, which is based in Chicago. Over the summer, a design team made up of the Japanese firm of Mitsubishi Jisho Sekkei and Murphy/Jahn was picked to design a new office building for the site, Mr. D'Silva says.

Japan Post, Mitsubishi and the Tokyo Metropolitan Government will now study whether the glazed-brick building warrants saving in some way, Mr. D'Silva says, noting that preservation groups will be part of the discussion. He says the 1930s-era building is considered by some preservationists to be a significant part of Tokyo's early modern architectural heritage. Japan Post couldn't be reached for comment.

The building's future is uncertain as demand for new sites is fierce. The densely populated city was home to about 12.5 million residents in 2005, according to the Tokyo Metropolitan Government. The Japanese don't have a strong tradition of protecting older buildings aside from temples and shrines, and the post office's high-profile location has helped bring the issue of architectural preservation to the attention of a somewhat wider audience than usual, says Karen Severns, co-founder of the nonprofit Wrightian Architectural Archives Japan, dedicated to preserving architect Frank Lloyd Wright's Japanese legacy. "There is a very strong sense that buildings belong only to their owners and that owners may do what they will," says Ms. Severns, noting that a number of other architecturally significant buildings are also slated for demolition in Tokyo.

About six million square feet of high-end office buildings are expected to be completed this year in central Tokyo as the area's office market fetches rents for premium space that are among the world's highest, according to Andy Hurfurt, a director with CB Richard Ellis Japan, a real-estate-services firm.

Japan's real-estate market struggled after the bursting of the so-called asset bubble in the early 1990s was followed by a fall in national land prices. As Japan's economy has improved, many foreign investors have been betting big on the rebound. Foreign purchases of Japanese real estate totaled $11.9 billion in the first half of 2007, more than double the amount in the year-earlier period, according to Jones Lang LaSalle, a real-estate-services firm. It is unclear whether that pace of investment will continue amid the credit crunch, which is already slowing in some parts of the commercial markets in the U.S., and the political uncertainty fueled by the resignation last week of Japan's prime minister.

Fred Schmidt, a managing director and head of real estate in Japan for Morgan Stanley, says he remains a bullish net buyer of Japanese real estate. He likes the office market in Tokyo and believes the economy and relatively low amount of new construction as a percentage of existing inventory will keep premium rents rising, though at a slower pace.

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