And the Tokyo company quietly solving it
“We want to enter Japan. But the first six months will burn through our capital.”
When we speak with foreign executives evaluating market entry into Japan, one concern surfaces with remarkable consistency. It is rarely the regulatory complexity, the language barrier, or even the difficulty of finding talent — though these matter. The concern that most often forces companies to scale back their plans, or postpone them entirely, is the cost of securing a physical office.
The number that stops people is not the monthly rent. It is the upfront commitment that traditional Japanese commercial real estate demands before a single business activity can begin, and the cost that awaits them whenever they decide to leave.
This is the “Japan office problem” — a structural feature of the domestic market that most market-entry advisors gloss over, and that most foreign companies discover only after they have signed letters of intent and committed to timelines. This article explains the problem in detail, examines why the first wave of solutions fell short, and introduces a Tokyo-based company that has built a structurally different answer.
The peculiarities of Japanese commercial real estate
Japan’s traditional office leasing market operates on customs that have remained largely unchanged for decades, and that differ significantly from those in the United States, Europe, or most of Asia.
When a company signs a standard Japanese office lease, it is typically required to deposit the equivalent of six to twelve months of rent as security (the shikikin deposit). For a modest office at JPY 300,000 per month (approximately USD 2,000), this means an upfront cash commitment of JPY 1.8 million to JPY 3.6 million (USD 12,000 to USD 24,000) — before any furniture, network installation, or signage has been considered.
The deposit alone, however, is not the full picture. Tenants in Japan are also responsible for genjō kaifuku — the obligation to restore the premises to bare-shell condition upon vacating. This is not a light cleaning. It means demolishing any improvements, removing all partitions, restoring ceilings and flooring, and returning the space to exactly the state in which it was received. The cost of this work, performed by approved contractors, typically runs JPY 50,000 to JPY 100,000 per tsubo (approximately USD 100 to USD 200 per square meter).
The implication is that a company entering Japan must commit, on day one, to a large sunk cost that can never be recovered, and must mentally reserve a second large sum for the day it eventually moves or withdraws. For an established Japanese corporation with stable cash flows, this is manageable. For a foreign company testing the market, building a representative office, or scaling a regional team whose size is not yet known, this is a structural disincentive to entering Japan at all.
What the coworking wave promised — and where it fell short
In the late 2010s, international coworking operators arrived in Japan with what appeared to be the obvious solution: flexible contracts, low entry costs, all-inclusive amenities. The proposition was compelling, and the early growth was rapid.
Beneath the surface, however, most operators were running a sublease business. Rather than owning their buildings, they signed long-term master leases with property owners, invested heavily in interiors, and then sublet smaller spaces under short-term contracts to end users. This model accelerated rollout, but it introduced two structural weaknesses that became visible during the pandemic.
First, the operators carried a permanent obligation to pay the underlying master lease, regardless of their own occupancy rate. When economic shocks reduced demand, several large operators found themselves with empty buildings and unchanged rent bills. Some restructured. Some withdrew from the market entirely. Tenants who had chosen these providers for their “flexibility” suddenly found themselves searching for alternative offices on short notice.
Second, because the operators were paying market-rate master leases — costs that fluctuated upward in boom periods — their pricing to end users could never approach the underlying cost of the real estate itself. The tenant was always paying both the building’s economic rent and the operator’s margin layered on top.
From a foreign entrant’s perspective, this meant trading one form of risk (high upfront commitment) for another (provider instability and continued cost inflation). The structural problem of Japanese office economics had not been solved. It had been repackaged.
A different architecture: Tensho Building Co., Ltd.
The company we want to introduce in this article approaches the problem from a fundamentally different angle.
Tensho Building Co., Ltd., founded in 2004, operates 35 office locations across Japan — 31 in Tokyo and 4 in Osaka — comprising 3,561 individual private offices. What distinguishes the company is not the scale itself, but the structure beneath it.
Many of the company’s locations are operated as single-building rental offices, and the company handled both the land acquisition and the design planning for these projects. By planning the design from the initial construction phase, the company can create efficient office spaces, enabling it to offer affordable office space to each tenant.
The company has extended this logic of vertical integration into adjacent functions. Interior construction is performed by a sister company within the same group, Tensho Takumi Co., Ltd. Facility management — daily cleaning, equipment maintenance, security systems — is handled by another sister company, Tensho Facilities Co., Ltd. The 20% to 30% margins that external contractors typically charge for these services are eliminated from the cost structure entirely.
Three functions that are conventionally divided across separate companies — real estate development, interior construction, and facility management — are unified within a single corporate group. This is the structural source of the company’s pricing advantage. It is not a marketing position. It is built into the architecture of the business.
What this means in numbers
For a foreign executive evaluating Tensho against a traditional Japanese lease, the comparison looks like this.
Initial deposit: A traditional lease requires six to twelve months of rent. Tensho charges a flat JPY 110,000 (approximately USD 730) for multi-person rooms, or JPY 55,000 (approximately USD 365) for single-person rooms and booths. New location openings frequently feature promotions that reduce even these amounts by 90% or include a free first month.
Utilities: A traditional lease bills electricity and water as monthly variable costs. At Tensho, these are zero. All utility costs are included in the common-area fee, which means a foreign company can budget its Japan office costs with complete predictability from month one.
Lease renewal fees: Japanese leases customarily require a renewal payment of one to two months of rent at the time of renewal. At Tensho, this is zero. There is no penalty for staying long-term.
Restoration costs on departure: A traditional lease requires full restoration to bare-shell condition, often costing several million yen. At Tensho, the tenants are not required to pay restoration costs for damage or soiling that occurs within the scope of normal use.
For a market-entry executive, the last item — the exit cost — is often the most strategically significant. It means that a decision to expand into a larger Tensho office, to relocate to a different district, or to wind down operations entirely, can be made on business grounds alone. The financial penalty that would normally accompany such decisions is removed from the equation.
Function over decoration: the design philosophy
It is worth noting what Tensho deliberately does not do. The company does not build elaborate lounges with branded coffee bars. It does not host networking events with curated speaker lineups. It does not invest in designer furniture or photogenic communal spaces.
This is not a cost-cutting omission. It is a deliberate design philosophy. The company’s position is that these amenities, however attractive in marketing photography, are funded by tenant rent. By eliminating them, Tensho transfers the savings directly to the cost structure.
What tenants receive instead is the functional core: individually lockable private offices, building-wide automatic locks and security systems, free use of internet provisioned from day one, complete office furniture, free use of meeting rooms within the building, multifunction printers, shredders, mail and parcel boxes, and a clean and well-maintained environment maintained daily by the in-house facilities team.
One design detail captures the company’s mindset particularly well. Tensho’s “booth-type” offices are built with partition walls measuring between 180 and 194 centimeters in height — tall enough that an adult standing inside cannot make eye contact across the partition, ensuring practical privacy, but deliberately not extending to the ceiling. The reason is that Japanese fire code treats fully sealed rooms as independent fire compartments, each requiring its own sprinkler heads, fire alarms, and dedicated air conditioning ducting. By leaving a calculated gap above the partition, the entire floor is legally treated as a single space, and the massive capital expenditure on per-room fire safety systems is avoided. Tenants receive the same practical privacy at a fraction of the underlying construction cost.
This is the kind of detail that signals a company that has thought carefully about its economics, rather than one that has simply marked up its costs.
Why this matters for foreign companies entering Japan
For a foreign company contemplating market entry, the Tensho proposition aligns with the operational realities of the entry process itself.
Company registration requires a physical address. A virtual office in many cases is not acceptable for Japanese corporate registration, particularly when the entity intends to apply for certain licenses or visas. Tensho offices satisfy this requirement.
The Business Manager Visa requires a physical office. Foreign nationals seeking to obtain a Business Manager Visa to operate their Japanese subsidiary must demonstrate a substantive office presence. A registered Tensho office meets this requirement with documentation that immigration authorities recognize.
Address prestige matters in B2B Japan. Tensho operates ten offices in Minato Ward, central Tokyo’s most prestigious business district, encompassing Akasaka, Aoyama, Azabu-Juban, Shimbashi, and Hamamatsucho. For a foreign company seeking to build credibility with Japanese enterprise customers, a Minato-ku registered address is a tangible asset.
Station proximity supports practical operations. Every Tensho location is within a five-minute walk of a train station. For executives traveling between meetings, for employee commute calculations, and for client visits, this consistency is operationally meaningful.
The Osaka network supports two-base strategies. Tensho opened its Osaka expansion in April 2026 with locations at Yodoyabashi and Sakaisuji-Hommachi. For foreign companies that need a Tokyo headquarters supported by a Kansai branch — common for manufacturing, trading, and consumer-goods sectors — both ends of the network are now available within the same provider.
Our recommendation
One Step Beyond Co., Ltd. is a management consulting firm specializing in bidirectional cross-border support. We assist Japanese SMEs expanding overseas and foreign companies entering Japan, drawing on local partner networks across Sri Lanka, India, Southeast Asia, and Europe. Over the past decade, we have supported clients through more than 100 cases involving Japanese government subsidies, with cumulative approvals exceeding JPY 1.4 billion.
Across that work, the question of where a foreign company should establish its first Japanese office has been one of the most consequential early decisions. Choose poorly, and you commit capital that should have been deployed to sales, recruitment, or product localization. Choose well, and your fixed costs become predictable, your operational base becomes a working asset, and the door to scale or pivot remains open.
We have entered into a referral relationship with Tensho Building Co., Ltd. because we believe their structural answer to the Japan office problem aligns with how foreign companies actually need to operate during market entry — and because their economics, after careful examination, hold up to scrutiny.
If you are evaluating market entry into Japan, or if you are already operating overseas and considering how to structure your Japanese presence, we welcome the conversation. We will discuss your business stage, intended activities, geographic priorities, and growth assumptions, and we will recommend the office solution that best fits your situation — whether that is Tensho, an alternative provider, or a different structural arrangement entirely.
Tensho Building’s public website (English-language information available): https://www.tensho-office.com/
One Step Beyond Co., Ltd.
Hirotaka Mizutani, Founder & Representative Director
Certified SME Management Consultant (METI-registered)