Japan Office MarketView Q4 2024

Tokyo: Grade A rents spike by 2.0% q-o-q, marking largest increase in 10 years

The All-Grade vacancy rate for Q4 2024 fell by 0.5 pp. q-o-q to 3.5%, dropping below 4% for the first time in three years. Net absorption registered a robust 50,000 tsubo, roughly 20% above the previous quarterly average. The period saw companies looking to expand, upgrade, or move to superior locations, and others relocating from company-owned premises or opening branch offices. Grade A rents surged by 2.0% q-o-q, the largest single-quarter increase since Q2 2015. Leasing activity was primarily driven by properties in Marunouchi and Otemachi, where rents rose by 3.3% q-o-q on the back of an extremely tight supply-demand balance.

Osaka: Vacancy rates fall across all grades; rent levels increase

Vacancy rates fell for all grades during the quarter. Even though new Grade A supply equated to 7% of existing stock, the new building entered operation at high occupancy rates on the back of several major relocations from company-owned premises. Net absorption for 2024 reached 81,000 tsubo across all grades, the highest since surveys began. Rents continued to rise across all grades with many properties being able to raise asking rents.

Nagoya: Tenants remain selective

The All-Grade vacancy rate remained unchanged q-o-q at 4.3%; the Grade A vacancy rate slid by 0.6 pp. to 3.8%; and the Grade B vacancy rate remained unchanged at 4.2%. While vacancies were steadily filled by expansions and upgrading relocations, vacancies arose in less attractive existing buildings. Rents increased across all grades, with asking rents raised in several buildings, particularly those seen as offering value for money and attracting tenants.

Regional cities: Vacancies steadily absorbed in existing buildings with demand remaining robust

All-Grade vacancy rates fell q-o-q in seven of the 10 cities surveyed, rising in the other three. While vacancy rates rose on the back of new supply in some cities, robust nationwide demand was observed, particularly from companies looking to upgrade or move to superior locations. All-Grade rents for the quarter rose q-o-q in eight of the 10 cities surveyed, falling in just two. The rents continued to show a moderately rising trend.