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Aging-Related Depreciation of Office Rents and Renovation Effects

日本語

June 4, 2026
Kimiaki Shinozaki*1
Kouhei Shintani*2
Tetsuto Sogabe*3
Yoshio Nakayama*4
Sahoko Furuta*5

Abstract

The items of "Office space rental" in the Services Producer Price Index (SPPI), which is created and published by the Bank of Japan, considers the aging-related depreciation of office properties over time as a decline in service quality and reflects this in the index. However, the current method relies on empirical analysis derived from 2007 data, which does not adequately consider changes in external conditions since then. This study utilizes new lease contract rent and attribute data provided by the XYMAX Group, a leading office brokerage and management company, and applies the hedonic method to empirically analyze the impact of property depreciation on office rents. The primary findings of this study are as follows: (1) Office rents in Japan generally depreciate at a consistent rate of 1.4% annually for about 25 years after the building is newly constructed, after which the rate of depreciation gradually slows. This trend aligns with prior studies conducted on commercial property in the United States. (2) The pace of depreciation varies based on property size. Large-scale properties depreciate slightly faster than small-to-medium properties. However, while small-to-medium properties continue to depreciate even after the rate of depreciation has slowed, large properties tend to maintain a relatively stable state once their depreciation rate diminishes. (3) Renovations reverse depreciation by approximately 8.2 percentage points at most compared to rents at the time of new construction. This reversal effect lasts for about 16 years, during which an average mitigation effect of 5.4 percentage points in depreciation is observed.

JEL classification
C43, E31, R32, R33

Keywords
price index, quality adjustment, hedonic approach, office rent

This paper is a revised version of presentations delivered at the Japanese Joint Statistical Meeting 2025, 39th meeting of the Voorburg Group on Service Statistics, and the International Conference on Real Estate Statistics 2026. We are deeply grateful for the valuable comments provided by attendees of these meetings, as well as by Chihiro Shimizu (Hitotsubashi University), Dennis Schoenmaker (CBRE Econometric Advisors), Xuxin Mao (Bank of China, London), and many staff members of the Bank of Japan, especially, Hibiki Ichiue, Yuto Iwasaki, Takuji Kawamoto, Yoshiyuki Kurachi, Tomohiro Sugo, Koji Nakamura, and Ichiro Muto. Any potential errors or omissions, however, are solely the responsibility of the authors. Furthermore, the opinions and interpretations expressed in this paper are those of the authors alone and do not represent the official views of the Bank of Japan or the XYMAX Group.

  1. *1Research and Statistics Department, Bank of Japan
    E-mail : kimiaki.shinozaki@boj.or.jp
  2. *2Research and Statistics Department (currently Personnel and Corporate Affairs Department), Bank of Japan
    E-mail : kouhei.shintani@boj.or.jp
  3. *3XYMAX RESEARCH INSTITUTE Corporation
    E-mail : sogabe@xymax.co.jp
  4. *4XYMAX RESEARCH INSTITUTE Corporation
    E-mail : yoshi-nakayama@xymax.co.jp
  5. *5Research and Statistics Department (currently Financial Markets Department), Bank of Japan
    E-mail : sahoko.furuta@boj.or.jp

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