MARKETVIEW | JAPAN OFFICE | Q1 2024
MARKETVIEW | JAPAN OFFICE | Q1 2024
For first time in four years, no cities saw drop in average rents, as office demand strengthens ＋0.2% Forecast* Y-o-Y GDP Growth Q1
12pts 1pts Q-o-Q －
BOJ Tankan DI (All Enterprises) Q1
＋0.7% Q-o-Q Tokyo Grade A Rent Q1
－0.9pts Q-o-Q
Tokyo Grade A Vacancy Rate Q1
*JCER Forecast (ESP forecast)
Tokyo: Rents rise across all grades for second consecutive quarter ‒ The All-Grade vacancy rate fell for the second straight quarter, slipping by 0.4 pp. q-o-q to 4.3%. Net absorption for the quarter reached 63,000 tsubo, roughly 1.5x the previous quarterly average. Numerous vacancies were filled over the quarter, particularly in large, newer buildings, as tenants looked to upgrade their offices, improve office location, or move to temporary premises for the purposes of rebuilding. Rents rose across all grades for the second consecutive quarter, with owners of buildings whose vacancies have been filled now looking to put rents back up to their former levels.
Osaka: Demand remains robust even as new supply pushes up vacancy ‒ The All-Grade vacancy rate climbed by 0.6 pp. q-o-q to 3.5% in Q1 2024, primarily due to significant new supply equivalent to 1.3x the past average annual level coming on stream during the quarter, much of which still contains unoccupied units. Demand remained robust, however, with vacancies absorbed across all building grades, ensuring that the increase in the vacancy rate was kept to a minimum. Grade A rents remained unchanged from the previous quarter, with robust demand halting the decline in rent which had continued for almost three years.
Figure 1: Grade A Average Assumed Achievable Rent
40,000 JPY/tsubo
▶ Forecast
35,000
30,000
25,000
Nagoya: Rents increase across all grades for first time in four years
Regional cities: No rent decline recorded for the first time since pandemic ‒ All-Grade vacancy rates fell q-o-q in seven of the 10 cities surveyed, rising in the other three. While some cities saw vacancy rates rise on the back of new supply, robust demand was observed nationwide by companies looking to expand, move to larger premises, or relocate temporarily for the purposes of rebuilding. All-Grade rents for the quarter rose from the previous quarter in nine of the 10 surveyed cities, remaining unchanged in the remaining one. This represented the first time since Q1 2020 that no regional cities recorded a drop in average rents.
20,000
15,000
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 Q2 2024 Q3 2024 Q4 2024 Q1 2025
‒ The All-Grade vacancy rate recorded a marginal q-o-q increase of 0.2 pp. to reach 5.8% this quarter, with new supply entering the market featuring some units still vacant. Net absorption nevertheless reached 11,000 tsubo, 3x the past quarterly average, as several vacancies were filled in recently completed buildings. Rents grew q-o-q in all grades for the first time in four years. Grade B saw the most marked increase, which served to push up rents across the board.
Tokyo
Osaka
Nagoya
Source: CBRE, Q1 2024
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