Japan Office MarketView Q3 2023

October 26, 2023 10 Minute Read

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Tokyo: Rents remain unchanged across all three grades

The All-Grade vacancy rate for Q3 2023 rose to 5.2%, up 0.3 pp. from the previous quarter. The increase in vacancy observed this quarter was primarily due to new supply coming on stream with some space still available for lease. With the relatively cheap rents asked by landlords of units in existing buildings proving attractive to potential tenants, vacancies in such properties continued to be filled. As a result, there are now a disproportionate number of vacancies in newly completed buildings. Rents remained unchanged across all three grades, but All-Grade rents dropped by 0.1% q-o-q, pushed down because of downward rent adjustments mainly in small- to mid-sized buildings.


Osaka: Grade A vacancy rate drops for fourth straight quarter

The All-Grade vacancy fell by 0.4 pp. to 3.3% this quarter on the back of continued robust demand. The Grade A vacancy rate dropped by 0.5 pp. q-o-q to 3.0%, marking the fourth straight quarter of decline. Companies relocating to superior sites or carrying out in-house expansions absorbed a number of large vacancies during the period. Meanwhile, All-Grade rents fell by 0.1% from the previous quarter as landlords continued to lower rents to secure tenants.


Nagoya: First new supply since 2018 pushes up Grade A vacancy for first time in four quarters

The All-Grade vacancy rate rose by 0.6 pp. q-o-q to 5.8%, the first increase in four quarters. This was largely a result of vacancies within new supply completed during the quarter. However, the one Grade A office building completed in Q3 2023 commenced operations with a comparatively high occupancy rate. Vacancies also continued to be filled in existing buildings, particularly those seen by tenants as offering value for money. All-Grade rents stayed unchanged from the previous quarter; with fewer vacancies, fewer landlords were compelled to cut rents.


Regional cities: Tenant enquiries remain stable as vacancies absorbed in existing buildings


During Q3 2023, the All-Grade vacancy rate rose q-o-q in four of the 10 surveyed cities, remained unchanged in four, and fell in the remaining two. Of the cities reporting higher vacancy, new supply was the primary cause of the increases observed in Sapporo and Yokohama. Tenant enquiries remained stable nationwide. All-Grade rents for the quarter rose q-o-q in six of the 10 cities surveyed, remained unchanged in two, and fell in the remaining two. As was the case in the previous quarter, a majority of regional cities saw rent increases.