Japan Office MarketView Q1 2025

Tokyo: Rents rise across all grades for sixth consecutive quarter

Vacancy rates fell across all grades in Q1 2025, marking the second consecutive quarterly decline. The Grade A vacancy rate registered the sharpest fall, slipping by 0.6 pp. to 3.6%, as net absorption for the grade set a new quarterly record of 105,000 tsubo. Relocations were observed among a wide variety of sectors for the purposes of upgrading, improving location, or expansion. Rents rose across all grades for a sixth consecutive quarter, with the rate of increase accelerating across all categories as landlords of more competitive properties continued to hike asking rents.

Osaka:  Vacancy rates fall across all grades while rents continue to increase

Vacancy rates declined across all grades for the second consecutive quarter. The All-Grade vacancy rate fell to 2.6%, 0.3 pp. below the figure recorded in Q4 2023, just before the start of the significant new supply wave in 2024. Demand remained strong in Q1 2025, while rents increased across all grades for the third straight quarter. Grade A rents registered a significant spike of 1.9% q-o-q, well up from the 0.4% q-o-q increase recorded in Q4 2024.

Nagoya: Grade A vacancy rate drops to 2.3%, breaking 3% threshold for first time in four years

The All-Grade vacancy rate slid by 0.8 pp. q-o-q to 3.5% in Q1 2025. Vacancy in the Grade A segment registered the sharpest fall, declining by 1.5 pp. to 2.3%, falling below the 3% threshold for the first time since Q1 2021. During the quarter, large vacancies were absorbed by expanding, relocating, or upgrading tenants. Average rents increased across all grades, with owners of buildings attracting significant demand and with few remaining vacancies continuing to raise their asking rents.

Regional cities: Robust demand ensures vacancies steadily filled in existing buildings

All-Grade vacancy rates for the quarter fell q-o-q in seven of the 10 surveyed cities, remained unchanged in one, and rose in the remaining two. Strong demand was observed from a wide variety of sectors, with tenants looking to upgrade, improve location, or expand their floor space. All-Grade rents for the quarter rose q-o-q in eight of the 10 cities surveyed, remaining unchanged in one, and falling in just one. Rent increases were increasingly observed in a wide range of cities, not only for properties below the market average, but also for those already in higher rent brackets.