Tokyo Grade A vacancy rate drops for first time in two years as vacancies in existing buildings continue to be filled

Tokyo: Some signs of recovery in demand

The All-Grade vacancy rate for Q1 2022 rose by 0.1 points q-o-q to 4.0%. While several newly completed buildings came on stream with some units still vacant, vacancies in existing buildings continued to be filled by companies relocating or expanding their office space, leading the Grade A vacancy rate to fall for the first time in two years. All-Grade rents declined by 0.8% q-o-q. Although higher-grade buildings were more likely to see rent adjustments in order to secure demand, some buildings saw their rents bottom out.

Osaka: Supply of larger buildings accelerates

The All-Grade vacancy rate for the quarter rose by 0.8 points q-o-q to 3.7%. While vacancies were filled in existing buildings whose rents were seen to be inexpensive relative to quality, a number of new buildings commenced operations with vacancies. New supply for the quarter was 40,000 tsubo, roughly equivalent to two years’ worth of average annual supply over the last few years. All-Grade rents fell by 0.2% q-o-q. With fewer tenants being able to afford premium rents, higher-grade buildings saw larger rental decline.

Nagoya: Rise in All-Grade vacancy rate eases

The All-Grade vacancy rate remained unchanged q-o-q at 4.6%, representing the first time since Q1 2020 that the vacancy rate did not rise. While several large-scale vacancies were filled by companies relocating for expansion or rebuilding, one new building was completed with vacancy. All-Grade rents fell by 0.1% q-o-q. Asking rents continued to be lowered in a number of buildings, particularly those still dealing with relatively large vacancies.

Regional cities: Companies keen on upgrading their offices

The All-Grade vacancy rate fell in six of the 10 surveyed cities, remained unchanged in one, and rose in the remaining three. While new buildings entered operation with some vacancies, several cases were observed in which vacancies were filled by companies relocating for the purposes of upgrading their office. Rents fell q-o-q in seven of the 10 surveyed cities and rose in the other three. In cities with few vacancies or large cancellations, rents were raised for some buildings.