MARKETVIEW | JAPAN OFFICE | Q2 2023
MARKETVIEW | JAPAN OFFICE | Q2 2023
Decline halts for Tokyo Grade A rents but upcoming new supply likely to trigger further adjustments ＋0.3% Forecast* Y-o-Y GDP Growth Q2
8pts ＋3pts Q-o-Q
BOJ Tankan DI (All Enterprises) Q2
±0.0% Q-o-Q Tokyo Grade A Rent Q2
＋1.8pts Q-o-Q
Tokyo Grade A Vacancy Rate Q2
*JCER Forecast
‒ The All-Grade vacancy rate for Q2 2023 rose by 0.3 pp q-o-q to 4.9%, primarily due to new supply coming on stream with significant vacancies. Although vacant space in new supply was equivalent to 0.7% of total stock, the continuing absorption of space in existing buildings ensured the overall increase in vacancy rate was limited to 0.3 pp. All-Grade rents fell by 0.2% q-o-q on the back of the continued lowering of asking rents in buildings with prolonged vacancies.
Osaka: Tenant demand remains robust
‒ The All-Grade vacancy rate rose by 0.1 pp q-o-q to reach 3.7% this quarter due to additional vacancies in existing premises as a result of relocations to buildings completed last year. Demand remained generally strong, however, with vacancies continuing to be filled by relocations from suburban areas, consolidations, and expansions. All-Grade rents were unchanged from the previous quarter, with interest in larger units remaining limited.
Nagoya: All-Grade vacancy rate drops for the third straight quarter
‒ The All-Grade vacancy rate slipped by 0.3 pp q-o-q to 5.2% in Q2 2023, marking the third straight quarter in which it has fallen. Compared to last year, interest is seen not only for small- to medium-sized but also for larger units. With vacancies absorbed in all range of floor space this quarter, the vacancy rate fell across all grades. All-Grade rents rose by 0.4% q-o-q, the first quarterly increase since Q1 2021. During the quarter, several landlords were seen adjusting previously lowered asking rents back up to their original levels.
Regional cities: Absorption of space in existing buildings pushes down vacancy in many cities
‒ All-Grade vacancy rates fell q-o-q in seven of the 10 cities surveyed, rising in the other three. The number of cities with declining vacancy rates increased from five in Q1 2023 on the back of the continued absorption of vacancies in existing buildings. All-Grade rents for the quarter rose q-o-q in seven of the 10 cities surveyed, falling in the remaining three. Cities in which average rents increased saw hikes in asking rates in buildings now seen as offering value for money and in new buildings where leasing is progressing smoothly.
1
CBRE RESEARCH
Figure 1: Grade A Average Assumed Achievable Rent
40,000 JPY/tsubo
▶ Forecast
35,000
30,000
25,000
20,000
15,000
Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024
Tokyo: All-Grade vacancy rate rises after two consecutive quarters of decline
Tokyo
Osaka
Nagoya
Source: CBRE, Q2 2023
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