Tokyo, Nagoya Grade A Vacancy Rate Falls for First Time in Four Quarters

Osaka Grade A Vacancy Rate Falls Below 1%

Tokyo, July 19 2017 - CBRE today released market trends for office buildings in thirteen cities across Japan for Q2 2017.


  • Tokyo Grade A vacancy rate fell 0.5 points q-o-q to 3.7%, the first decline in four quarters
  • Osaka Grade A vacancy rate fell below 1% for the first time since 2007 Q1.
  • Nagoya Grade A vacancy rate fell 0.6 points q-o-q to 4.6%, the first decline in four quarters


  • Tokyo Grade A rents are forecast to peak in 2H 2017 and to fall to 4.3% by the end of 2018
  • Osaka Grade A rents are forecast to rise faster due to the tight market and to increase by 5.4% from this quarter until the end-2018
  • Nagoya Grade A rents are forecast to decline 1.4% from this quarter until the end of 2018

■Tokyo 23 Wards

In Q2 2017 the Tokyo All-Grade vacancy rate decreased by 0.1 percentage points q-o-q to 2.3%. On the back of improving corporate earnings, the Tokyo office market continued to see stable demand for expansions and upgrades, with the IT, manufacturing and service sectors being particularly active. The period saw large floor plates being filled in Grade A offices, albeit mainly in relatively low priced buildings. As a result, the Tokyo Grade A vacancy rate fell 0.5 points q-o-q to 3.7%, the first decline in four quarters.

Grade A assumed achievable rent rose 1.0% q-o-q to JPY 36,300 per tsubo in Q2 2017. This slight increase was driven by several inexpensive buildings asking for higher rents. Looking at the market overall, however, occupiers retained a cautious stance towards rent levels. This is evident in the fact that some owners of nearly-complete Grade A buildings decided to compromise on tenancy terms in order to quickly improve occupancy. On the other hand, owners of recently-completed buildings with high occupancy raised asking rents for the remaining space, but this has actually slowed down the take-up pace for such spaces.

Companies that were not in a hurry to relocate sought spaces in unfinished buildings where favorable terms could be obtained, rather than in new buildings with relatively high rents. As many pre-contracted tenants are relocating from an existing building, this could push up vacancy rate in the next coming quarters. With supply expected to increase over the next couple of years, competition to secure tenants is likely to intensify and some existing buildings may also need to revise down their offer terms. CBRE Research forecasts that Grade A rents will peak in H2 2017 and continue to gradually fall thereafter. Grade A rents are forecast to fall by 4% from this quarter until the end 2018.

"Tenants across a broad range of sectors are considering location upgrades or consolidating their spaces into one large space. However, many companies are also awaiting favorable relocation terms. How the leasing would fare at newly completed buildings may determine the course of the market from here onwards," said Junichi Taguchi, managing director of CBRE’s Advisory and Transaction Services.

■ Osaka

In Q2 2017 the All-Grade vacancy rate in Osaka decreased by 0.3 percentage points q-o-q to 2.9%. This marked a new low for the second consecutive quarter and the lowest level since the CBRE surveys began in 1993. This is also the first time the vacancy rate has fallen below 3%. This quarter also saw many companies deciding to move for positive reasons, including upgrades and business expansions.

The Osaka Grade A vacancy rate fell 0.6 points to 0.5% in Q2 2017, not far from the historical low of 0.4% recorded in Q4 2007. Given the robust levels of demand, tenants are keen to take up any available space in Grade A buildings. Assumed achievable rents rose 2.4% q-o-q to JPY 21,400 per tsubo, the highest rate of growth nationwide for the second quarter running.

"Tenants are increasingly concerned about not being able to find space," commented Takashi Katono, executive director of CBRE's Osaka branch. "As new supply will remain very scarce in future, competition between tenants for space is likely to intensify."

■ Nagoya

The All-Grade vacancy rate in Nagoya decreased by 0.5 percentage points q-o-q to 3.4% in Q2 2017, the second consecutive quarterly decline. Many tenants are relocating to bigger space as a result of business expansion. Demand was driven by consolidations and expansions, as well as occupiers who decided to take up additional space within their current premises as soon as the previous tenant of the space decided to leave. Many tenants also had to move out of obsolete buildings ahead of their demolition and redevelopment. In the Fushimi/Marunouchi area, the vacancy rate was 2.4%, the first time it has fallen below 3% since Q2 1999.

The Nagoya Grade A vacancy rate fell 0.6 points q-o-q to 4.6% in Q2 2017, the first decline in four quarters. The period saw space in buildings completed during the previous quarter filled by start-up companies as well as multinationals who had been looking for new open offices. Large spaces were filled in existing buildings as well, including a whole floor taken up by one of the existing tenants. Assumed achievable rents increased in more buildings alongside the improvement in occupancy rates, rising by 1.7% compared with the previous quarter, to JPY 24,200 per tsubo.

"Space was filled across all grades in Q2 2017, capturing the robust level of tenant demand," said Hidekazu Fujiwara, executive director of CBRE's Nagoya branch. "Demand is particularly focused on the Nagoya Station area, where there are expectations for future redevelopment."


  • Sapporo vacancy stood at 0.5%, with enquiries concentrated on the limited volume of available space
  • Kyoto vacancy stood at 0.9%, the first time it has fallen below 1%
  • Fukuoka vacancy stood at 0.6% with severe tightness set to continue

The vacancy rate in all regional cities declined in Q2 2017 compared with the previous quarter, with the exception of Hiroshima. In Sapporo, Saitama, Kyoto, and Fukuoka, vacancy rates hit record lows, falling below 1% in each city. In Sendai and Saitama, buildings were nearly fully let upon completion, suggesting that supply is falling behind demand. The vacancy rate in Sendai fell below 5% for the first time in 14 years.

Assumed achievable rents rose in all cities in Q2 2017. Increases of over 2% q-o-q were recorded for the second quarter running in Kyoto and Fukuoka. Increases exceeded 1% in Sapporo, Saitama, Sendai, and Hiroshima, with the rate of increase accelerating in many cities.





■ Tokyo

■ Osaka

■ Nagoya



Market data and detailed discussion of market conditions for each city can also be found in the Q2 2017 Japan Office MarketView published on July 28 or on the CBRE website.

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