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Research Q2 2026

Japan Market Dynamics

jll.com

Japan Market Dynamics - 2025年第4四半期

Contents 01

Summary

Logistics

Property Clock

Tokyo

Osaka

Fukuoka

02 Three Distinct Hubs in Fukuoka’s Office Market

How CPI-linked leases can navigate Japan's rent inflation

Retail

Feature Article

03 Investment

Hotel 9

04 Office

08 Sustainability

Tokyo

Osaka

Fukuoka

Summary

Investor appetite for real estate remains resilient despite ongoing geopolitical uncertainty and concerns over further interest rate hikes, supporting continued expansion in global real estate investment activity. In this environment, Japan's commercial real estate investment market maintained strong momentum, with investment volume reaching JPY 3.75 trillion in H1 2026, up 17% y-o-y and setting a record high for the second consecutive year. Offices accounted for the largest share of investment activity at 45% of total transaction volume. Overseas investors remained highly active, representing approximately 30% of total investment volume. In addition to its traditionally attractive stability and income profile, Japan's real estate market continues to benefit from strengthening rental growth prospects, sustaining strong interest from both domestic and international investors. In the office market, leasing demand remained robust, supported by strong corporate earnings. With very limited immediately available space, the vacancy rate remained exceptionally tight at 0.8%, while average rents climbed to JPY 42,109 per tsubo per month. With further rental growth anticipated, indicative cap rates remained broadly unchanged during the quarter.

Logistics also continued to demonstrate solid fundamentals, driven primarily by demand from e-commerce and third-party logistics (3PL) operators. As new supply remained below the five-year historical average, the vacancy rate declined for a fourth consecutive quarter, while rents continued to rise at a moderate pace. Although indicative cap rates continued to edge upward, rental growth largely offset this upward pressure, keeping capital values broadly stable. In the prime retail market, leasing demand remained healthy, supported by sustained robust spending from affluent domestic consumers. Prime retail rents in Tokyo increased by 13% y-o-y in Q2, reflecting continued occupier demand for prime locations. This quarter's Sustainability Market Dynamics section focuses on WELL certification. Against a backdrop of rising corporate investment in human capital, companies are placing increasing emphasis on employee health and well-being, driving greater attention to third-party certification systems that assess and verify building health performance based on scientific and evidence-based criteria. As these considerations become more integrated into occupiers' real estate strategies, demand for WELL certification is expected to continue growing. Head of Research Hiroshi Okubo

Japan Market Dynamics - Q2 2026

Property Clock Grade A Office

Prime Retail

Logistics

Japan Market Dynamics - Q2 2026

01 Three Distinct Hubs in Fukuoka’s Office Market

Fukuoka has significantly enhanced both the quality and quantity of its office stock through large-scale redevelopment initiatives such as “Tenjin Big Bang” and “Hakata Connected”. This report examines three office areas defined by JLL—(1) Hakata Station, (2) Gion/Gofukumachi/Nakasu, and (3) Tenjin/Akasaka/Yakuin—focusing on rental trends, absorption, and tenant profiles.

in Q1 2026—the first new Grade A supply in about two years—further supported rental growth, marking the highest increase among the three areas.

Figure 1: Fukuoka city map

(1) Hakata Station Area

Author Research Manager

Haruka Matsumaru

As Kyushu’s largest transportation hub, the Hakata Station area hosts a concentration of corporate headquarters, including JR Kyushu. It is characterized by a relatively high share of manufacturing firms, particularly in chemicals, food, and metals, many located in newly built Grade A offices. As of Q1 2026, rents reached JPY 23,778 (+14.0% YoY) with a vacancy rate of 1.5%. Since 2019, approximately 76,000 sqm of Grade A space has been delivered, with most buildings reaching full occupancy within 6–12 months. The completion of the Nishi-Nippon City Building

Source: JLL Research

Feature Article

Japan Market Dynamics - Q2 2026

(2) Gion, Gofukumachi, and Nakasu Area As of Q1 2026, rents stood at JPY 17,853 (+2.7% YoY), with a vacancy rate of 0.4%—the lowest among the three areas in both rent and vacancy. While the area is predominantly composed of small- to mid-sized office buildings and has a limited supply of Grade A space, it benefits from relatively affordable rents and a central location within walking distance of both Hakata Station and Tenjin, supporting steady tenant demand. Wholesale and retail sectors account for a relatively large share of tenants in Grade A buildings in the area. The area represents a practical option for growing startups and cost-conscious companies compared with higher-rent buildings in Hakata or Tenjin. The extremely low vacancies reflect constrained supply alongside strong demand growth. Although large-scale redevelopment is unlikely in the near term due to the concentration of temples and shrines as well as landscape, cultural, and land-use constraints, any future Grade A development could unlock significant latent demand. (3) Tenjin, Akasaka, and Yakuin Area As of Q1 2026, rents reached JPY 25,355 (+3.8% YoY), making this the prime office market with the highest rental levels in Kyushu. The vacancy rate stood at 8.2%, higher than in other areas, largely due to the impact of substantial new supply. Since the completion of the Tenjin Business Center in 2021—the first project under the “Tenjin Big Bang” initiative—approximately 208,000 sqm of Grade A office space has been delivered through Q1 2026. Notably, around 92,000 sqm was supplied in 2024 and 2025, some of which are still in the process of lease-up. While performance varies by building, most have reached near-full occupancy within about two years after completion, underscoring steady corporate expansion and new market entry into Fukuoka. Grade A supply over the next three years is also expected to be concentrated in the Tenjin area. 6

Overall Market

In terms of tenant composition, the area has long hosted financial institutions such as banks and securities firms, as well as government offices. In recent years, however, there has been a notable increase in IT and telecommunications companies. Supported by its designation as a Financial and Asset Management Special Zone, Fukuoka is building an innovation ecosystem, including CIC’s 2024 opening, enhancing tenant diversity.

Across the three areas, average rents reached JPY 23,276 (+9.5% YoY) with vacancy at 4.4% in Q1 2026. While there had been concerns about oversupply, strong demand has absorbed the new stock, keeping the market tight. Although there is a possibility of supply-demand easing in the short term due to new supply, stable office demand is expected against the backdrop of strengthened recruitment and workplace strategy, and we expect vacancy rates to fall and rents to increase gradually over the medium to long term.

Figure 2: New Building Completions by year and area Hakata Station Gion・Gofukumachi・Nakasu Tenjin・Akasaka・Yakuin

NLA (tsubo)

20000

Hulic Square Fukuoka Tenjin 1260

15000 Fukuoka Daimyo Garden City 9135

10000

Tenjin Business Center 11487

Denki Building West Tower 6599

ONE FUKUOKA BLDG. 14823

Tenjin Business Center II 10193 Tenjin Sumitomo Seimei FJ Business Center 6996

Fukuoka Maizuru Square 4446 Fukuoka K Square 3395

5000 Hakata Connecta 4655

Hakata East Terrace 6113

Hakata FD Business Center 4663

Fukuoka Tenjin Center Rebuilding PJ 11312 Tenjin Brick Cross Nishi Nippon City Building North Tower 5630 Connect Square Hakata 5110 3453

Tenjin 1-7 PJ 7020

0 2021

Source: JLL Research

2022

2023

2024

2025

2026

2027

2028

Feature Article

Japan Market Dynamics - Q2 2026

02 How CPI-linked leases can navigate Japan's rent inflation

Author Research Senior Director

Yuto Ohigashi

Inflation has become increasingly evident in the Japanese economy. Prices have risen across a wide range of goods and services, and are now affecting the real estate market. Inflation is measured by the Consumer Price Index (CPI), an economic indicator that tracks changes in the prices of goods and services purchased by households.

In overseas markets, lease structures incorporating periodic rent increases are widely adopted. In the United Kingdom, upward-only rent review clauses, introduced in response to inflation risks following the oil shocks of the 1970s, are used in long-term leases. Under this structure, rents remain unchanged when market rents decline but rise when market conditions improve.

Feature Article

Japan Market Dynamics - Q2 2026

Figure 1: Tokyo Grade-A office rent and vacancy rate

Figure 2: 3% Annual increase scenario (five-year rent illustration)

(JPY/Tsubo/Month)

50,000 40,000

39,037

44,000 36,101

34,488

33,420

34,979

38,252

5% 4%

30,000

20,000

10,000 0

2021

2022

2023

Rent (including CAM)

2024

40,582

43,053

2026F

End 2025

Year 2

Year 3

Year 4

Year 5

Vacancy Rate

Source: JLL

In the United States, some markets have leasing contracts that employ annual rent escalation clauses. This allows for predictable rent increases while remaining responsive to market conditions. In an inflationary environment, fixed rents would decline in real value over time. Against this backdrop, CPI-linked lease structures can be viewed as a rational mechanism for sharing inflation risk more equitably between landlords and tenants. This avoids placing the burden solely on one party. Both parties benefit from a clear, market-based adjustment rule. Landlords benefit from value protection as property income keeps up with rising general prices. Tenants benefit from predictable costs as rental changes track official inflation data. Tokyo Grade A Office rent in the central five wards increased by 8

2025

38,252

39,400

41,799

+13%

0.7% 2020

+3% per year = Approx.13% increase over 5 years

Source: JLL

9.4% in 2025, with the vacancy rate at 0.7%, indicating a highly constrained market in which demand continues to exceed supply. Landlords are therefore seeking to maintain asset performance by securing leases at appropriate rent levels. In some cases, tenants have faced rent increase requests of 20–30% or more at the time of lease renewal or renegotiation, prompting some of them to relocate to more affordable office space rather than renew. Supply-demand conditions in the Tokyo office market are expected to remain tight. JLL forecasts that rents will increase by more than 15% in 2026. By comparison, Japan’s CPI, excluding fresh food, was 3.1% in 2025. Under CPI-linked lease structures, rental changes match CPI inflation at set intervals. Compared with sudden rental increases

at lease renewal, this arrangement leads to more gradual and predictable rent adjustments, allowing more effective budgeting. For example, if the monthly rent for Grade A office space in Tokyo—JPY 38,252 at the end of 2025—were to rise by 3% annually, it would reach JPY 43,053 in the fifth year, a cumulative increase of approximately 13%. In a rapidly rising rent environment, CPI-linked leases offer greater predictability than large, one-off increases. However, tenants should be mindful of potential risks. In practice, negotiating caps on annual rent increases to mitigate high inflation, and considering potential floor provisions requested by landlords, will be important factors in future office strategies. © Jones Lang Lasalle IP, Inc. 2026

Investment

Japan Market Dynamics - Q2 2026

Investment

Key trends

Global Investment Volumes Continue to Expand Global real estate investment volume is showing an

upward trend. Although geopolitical conflict and the potential for higher interest rates remain on investors’ minds, the impact on the real estate investment market is expected to remain limited going forward, as investors increasingly view volatility as structural rather than episodic.

Investment Expansion Driven by Rising Returns Rising investment returns across commercial real estate, driven by high occupancy rates and rental growth, are fueling investment expansion. Medium- to long-term rental growth expectations are increasing due to supply constraints and CPIlinked rent adoption, and expected to offset the negative impact of rising interest rates.

By the numbers (H1 2026)

+ 27% y-o-y

Global investment volume

2nd

Tokyo’s ranking by investment volume

+ 17% y-o-y

Japan Investment volume

2 10

Japan Investment Volume Reaches Record High In H1 2026, Japan investment volume reached JPY 3,751.7 billion, setting a new record following H1 2025. During 2Q26, office building transactions were observed not only in Tokyo CBD but also in other areas within Tokyo, along with a large-scale data center transaction.

Outlook In addition to robust investment demand, corporate activities such as real estate sales accompanying office relocations and asset-light strategies are being observed, and investment opportunities are expected to continue increasing. Full-year 2026 real estate investment volume is forecast to reach a record high of JPY 7 trillion.

30%

Inbound investment share in Japan

45%

Office investment share in Japan

Investment

Japan Market Dynamics - Q2 2026

Investment Investment

Historical Japan investment volume Japan investment volume

(1 Billion JPY)

•

8,000

•

Japan’s investment volume in H1 2026 reached JPY 3,751.7 billion, a 17% increase y-o-y. Building on the record set in 2025, this marked a new record high for first-half investment volume. Q2 2026 totaled JPY 1,676.5 billion, surpassing the previous Q2 record of JPY 1,502.4 billion set in 2007. Strong acquisition appetite from investors and a steady supply of properties for sale continue to drive robust market activity. During this period, office building transactions were observed not only in Tokyo CBD but also in other areas within Tokyo, along with a large-scale data center transaction exceeding JPY 150 billion.

+13% 6,000

+17% 4,000

2,000

Source: JLL

Investment

Japan Market Dynamics - Q2 2026

Investment Investment

Historical investment volume share by Sector Sector analysis •

•

• •

By sector, office remained the largest investment category. Office investment volume in H1 2026 reached JPY 1,695.7 billion, accounting for 45% of total volume, with its share increasing from a low of 33% in full-year 2023. As office rents continue to rise notably, transactions in Tokyo (excluding 5-ku) are also increasing. For logistics facilities, acquisitions by J-REITs remain subdued, with the sector's share at 14%, continuing its decline since 2023. Hotels saw their investment share increase to 12%, as transactions expanded into regional markets. Multifamily increased its investment share to 19%, driven by growing portfolio acquisitions by overseas investors.

100% 13%

11% 5%

80%

15% 9%

9% 14%

10% 2% 7%

13% 4% 5%

11% 25%

60%

17% 6%

14% 5%

6% 20%

12% 7% 16%

19%

18%

17%

12%

11% 11% 11%

21%

16%

21%

9% 6% 6% 19%

10% 18%

20%

43%

12% 5%

19%

12% 13% 9%

55%

53% 43%

52%

50%

52%

53% 40%

19%

10% 12%

15%

13%

26%

47% 32%

14%

24%

14%

65% 40%

19%

16%

17%

8% 52%

14%

12%

16% 31%

40% 60%

11%

13%

11%

33%

36%

46%

11%

43%

45%

Office

Retail

Logistics

Hotel

Multifamily

Other

Source: JLL

Investment

Japan Market Dynamics - Q2 2026

Investment Investment

Historical investment volume share by location Location analysis • •

•

By region, Tokyo CBD accounted for 43% in H1 2026, a slight increase from 42% in full-year 2025. Within Tokyo, large-scale office building transactions increased in areas outside CBD (5-ku), with Tokyo (excluding 5-ku) accounting for 23%, a significant increase from 14% in full-year 2025. Greater Osaka area’s share reached 15%, up from 13% in full-year 2025. A large-scale data center transaction exceeding JPY 150 billion was observed in Seika-cho, Kyoto Prefecture.

100% 6% 2%

80%

14% 13%

4% 3% 14% 11%

2% 2% 11% 7% 18%

2% 3% 7% 8%

9% 8%

21%

5% 4%

11%

15%

14% 20%

60% 16%

5% 3%

4% 5% 10%

3% 4% 15%

13% 13%

17%

7% 4%

3% 3%

4% 3%

15%

14%

16% 13%

20%

18%

16%

17%

16% 17%

18%

2% 3%

3% 5%

20%

13%

20%

16%

43%

57%

43%

52% 42%

38%

46%

43%

39%

14%

46% 36%

34%

13%

11% 18%

39% 29%

4% 4% 13%

15% 8%

23% 14%

16% 42%

40% 28%

3% 5%

17%

13% 57%

12%

22%

23%

25% 17%

7% 4%

18%

13%

40%

20%

18%

3% 4%

17%

19%

20%

3% 3%

43%

27%

Tokyo CBD (5-ku) Greater Osaka Other

Tokyo (Excluding 5-ku) Greater Nagoya

Greater Tokyo (Excluding Tokyo) Greater Fukuoka

Source: JLL Note: Tokyo CBC (5-kus) refers to Chiyoda-ku, Chuo-ku, Minato-ku, Shinjuku-ku and Shibuya-ku; Greater Tokyo refers to Tokyo, Chiba, Saitama and Kanagawa; Greater Nagoya refers to Aichi, Gifu and Mie; Greater Osaka refers to Osaka, Hyogo, Kyoto and Nara; Greater Fukuoka refers to Fukuoka, Saga, Nagasaki, Kumamoto, Oita, Miyazaki, Kagoshima and Okinawa. 13 © Jones Lang Lasalle IP, Inc. 2026

Office

Office Investment

Japan Market Dynamics - Q2 2026

Office Office

Tokyo Fundamentals (for this quarter) •

Strong corporate performance keeps demand for office solid; net absorption falls slightly due to lack of stock this quarter

•

Vacancy rate rises q-o-q to 0.8%

•

Average monthly rent per tsubo in the second quarter was 42,109 yen, up 4.6% q-o-q and 16.4% y-o-y

Net absorption Completions Vacancy rate Gross rent Rent growth Y-o-Y Stage in rental cycle

-5,800 tsubo 0 tsubo 0.8% JPY 42,109 per tsubo p.m. 16.4% Rents Rising

Note: Financial and physical indicators are for the 5 Kus Grade A office market. Data is on an NLA basis.

Net absorption in Tokyo Grade A office fell to -5,800 tsubos in 2Q26. While office demand continues to remain strong due to good corporate performance, there was no new supply this quarter, which resulted in negative net absorption. By industry, demand was driven by scientific research, professional and technical services and manufacturing.

Historical supply and demand trends

Tokyo’s vacancy rate in the Grade A office market in 2Q26 was 0.8%, up 0.1 pp q-o-q, and down 1.7 pp y-o-y. Tight vacancy was seen due to delay in the completion of new supply caused by soaring construction costs, with very limited availability of vacant space.

300

The average monthly gross rent per tsubo was JPY 42,109, up 4.6% q-o-q and 16.4% y-o-y in 2Q26. By submarket, rents increased in both the Otemachi/Marunouchi and the Akasaka/Roppongi submarkets, with rental growth particularly seen in the Otemachi/Marunouchi submarket, supported by its low vacancy rate. Capital values in 2Q26 rose 6.9% q-o-q and 21.1% y-o-y, accelerating from the previous quarter, due to strong momentum in rents and stable cap rates. There were no Grade A transactions completed this quarter.

Outlook

In the office leasing market, there is very limited amount of vacant space in existing buildings and projects scheduled for completion in the second half of 2026 are nearly fully leased with take-up for new supply that will enter the market in 2027 are seeing good progress. With delay in projects scheduled for 2029 materializing due to rising construction costs, tight supply-demand conditions are likely to continue in the foreseeable future. In the investment market, further rental increase and stable cap rates are expected to result in the rise of sale prices. Tokyo Grade A office definition

Area

Designated as office area by JLL in Tokyo 23-ku (Chiyoda, Minato, Chuo, Shinjuku and Shibuya)

Gloss Floor Area

30,000 sqm (9,075 tsubo) or more

Tsubo (thousands) 5% 4%

200

100

2% 1%

0% -1%

-100 2021

2022

Net absorption Typical floor plate

2023

2024

2025

New supply

1,000 sqm (302 tsubo) or more

YTD 2026

Vacancy rate

Office Investment

Japan Market Dynamics - Q2 2026

Office Office Office

Osaka Fundamentals (for this quarter) •

Strong demand from new office setups and expansion relocations, though limited availability may be constraining take-up.

•

Vacancy rate falls to 1.8%, highlighting an increasingly tight market

•

Average monthly rent per tsubo reaches JPY 28,083, up 3.6% q-o-q and 14.1% y-o-y.

Net absorption Completions Vacancy rate Gross rent Rent growth Y-o-Y Stage in rental cycle

3,600 tsubo 0 tsubo 1.8% JPY 28,083 per tsubo p.m. 14.1% Rents Rising

Note: Financial and physical indicators are for the 5 Kus Grade A office market. Data is on an NLA basis.

Net absorption totalled +3,600 tsubo in Q2 2026. Limited Grade A availability is pushing tenants toward alternative strategies: remaining in current offices, renovating, or using flexible workspaces. There are virtually no vacancies that match relocation demand. Traditionally, smaller spaces commanded higher per-tsubo rents, but this has reversed—premium pricing now applies to large spaces of 500+ tsubo. Q2 2026 vacancy rate fell to 1.8%, down 0.4 pp q-o-q and down 1.5pp y-o-y. The quarter saw no new supply, and the absorption of vacancies at Yodoyabashi Gate Tower and Grand Front Osaka Tower B primarily contributed to the decline in the vacancy rate. Rents averaged JPY 28,083 per tsubo per month, up 3.6% q-o-q and 14.1% y-o-y. Landlords have maintained the upper hand, with even those with vacancies not rushing to close deals but rather taking their time to aim for contracts at higher rents. On the other hand, rapid rent increases are creating new challenges. There is a perception gap between tenants' budget expectations and the rent levels landlords anticipate. In fact, some buildings have experienced a decline in inquiries after raising asking rents. Capital values increased by 5.6% q-o-q and 16.0% y-o-y in Q2 2026, driven by rising rents.

Tsubo (thousands) 100

-20

Outlook

The only new supply planned through 2030 is the "Taisei Midosuji Tower" (Chuo-ku, total floor area approximately 14,000 tsubo), scheduled for completion in July 2026, and the market is expected to remain extremely tight. Grade A office space is becoming genuinely scarce. As available floor decreases, rents continue their upward trajectory, with annual rental growth for 2026 forecast at approximately 12%. Osaka Grade A office definition

Historical supply and demand trends

Area

Designated as office area by JLL in Osaka (Kita,Chuo,Naniwa,Nishi and Yodogawa)

Gloss Floor Area

15,000 sqm (4,538 tsubo) or more

2021

2022

Net absorption Typical floor plate

2023

2024

2025 YTD 2026

New supply

600 sqm (181 tsubo) or more

Built Year

Vacancy rate 1990 or newer

Office Investment

Japan Market Dynamics - Q2 2026

Office Office

Fukuoka Fundamentals (for this quarter) •

Tenjin Business Center II completes, marking the beginning of the final stage of the large-scale supply cycle that started in 2021

•

Vacancy rate rises to 6.4% as newly completed building deliver with available space, while vacancy in existing buildings continues to decline

•

Average monthly rent per tsubo reaches JPY 23,852, up 2.5% q-o-q and 10.6% y-o-y

Net absorption Completions Vacancy rate Gross rent Rent growth Y-o-Y Stage in rental cycle

6,000 tsubo 10,200 tsubo 6.4 % JPY 23,852 per tsubo p.m. +10.4% Rents Rising

Note: Financial and physical indicators are for Fukuoka’s Grade A office market. Data is on a NLA basis.

Net absorption in Fukuoka's Grade A office market reached +6,000 tsubo in Q2 2026. Relocation demand aimed at improving office location and workplace environments remained robust. While relocations to newly completed buildings were primarily driven by large occupiers, the broader market continued to be led by small and medium-sized tenants upgrading from Grade B and lower-grade office buildings to Grade A buildings. This quarter the vacancy rate was 6.4%, up 2.0 pp q-o-q, mainly due to newly completed building delivering with vacant space. Vacant space in high-grade buildings completed during the recent supply cycle has accumulated, providing tenants with a wider range of relocation options. As a result, more tenants are taking longer to evaluate potential office locations, leading to a gradual slowdown in the pace of vacancy absorption.

Historical supply and demand trends Tsubo(thousands) 20 15

Average rents reached JPY 23,852 per tsubo per month, up 2.5% q-o-q and 10.4% y-o-y. Rental growth continued to be driven by newly completed and recently built high-grade office.

Outlook

As the current supply cycle enters its final stage and all Grade A office completions scheduled for 2026 have already been delivered, leasing activity is expected to gain further momentum in newly completed and recently built buildings. Vacancy created by new supply is likely to be absorbed gradually, supporting a continued decline in the overall market vacancy rate. However, the pace of vacancy absorption in newly completed and recently built high-grade buildings has slowed, with leasing periods becoming longer. As a result, rental growth may begin to moderate going forward. For full-year 2026, rents are projected to increase by approximately 7.5%.

Fukuoka Grade A office definition

Area

Designated as office area by JLL in Fukuoka (Chuo and Hakata)

Gloss Floor Area

15,000 sqm (4,538 tsubo) or more

8% 7% 6% 5% 4% 3% 2% 1% 0%

0 2021

2022

Net absorption Typical floor plate

2023

2024

2025 YTD 2026

New supply

600 sqm (181 tsubo) or more

Vacancy rate

Built YearLang Lasalle 1990 IP, or newer © Jones Inc. 2026

18 Japan Market Dynamics - Q2 2026

Logistics

Logistics Retail Office Investment

Japan Market Dynamics - Q2 2026

Retail Logistics Office Logistics

Tokyo Fundamentals(for this quarter) •

Robust demand from e-commerce and 3PL companies continues

•

Vacancy rate declines for four consecutive quarters to 7.7%

•

Rental growth continues due to rising construction costs and tight supply-demand balance

Net absorption Completions Vacancy rate Gross rent Rent growth Y-o-Y Stage in rental cycle

106,300 tsubo 73,000 tsubo 7.7% JPY 4,836 per tsubo p.m. +2.8% Rents Rising

Note: Tokyo logistics refers to the Greater Tokyo prime logistics market. Data is on an NLA basis.

Demand from e-commerce and 3PL companies remained robust, with net absorption in Q2 2026 reaching 106,300 tsubo. Due to rental growth and falling vacancy rates, leasing activity has started to improve even for newly completed properties that initially struggled to attract tenants due to high asking rents. New supply in Q2 2026 totaled 73,000 tsubo across four properties in Central Kanagawa and Ken-O Expressway areas, well below the five-year quarterly average of 175,600 tsubo. Two properties achieved high occupancy upon completion, while the other two recorded low initial occupancy due to competing vacant stocks in their markets, as well as their relative distance from highway interchanges. Nevertheless, leasing activity in existing stock continued to absorb vacant space, pushing the vacancy rate down to 7.7%, down 0.5pp q-o-q and 2.6pp y-o-y, marking the fourth consecutive quarter of decline. Rents for Greater Tokyo reached JPY 4,836 per tsubo per month, up 0.3% q-o-q and 2.8% y-o-y. Rising construction costs have pushed up rental levels for new properties, which has also supported rental growth in surrounding existing properties. In response to the tightening supply-demand balance, an increasing number of landlords are introducing CPI-linked rents and shortening lease terms. Capital values remained flat q-o-q and rose 0.9% y-o-y. While cap rates expanded for the third consecutive quarter in response to rising interest rates, continued rental growth largely offset the negative impact on values. Outlook: Given stable demand trends and selective new development in response to rising construction costs, rental growth across Greater Tokyo is expected to continue. However, rental growth is expected to remain limited for properties in fringe areas facing intense competition, as well as for multi-story lift access facilities (as opposed to ramp-access facilities), where vacancy rate remain relatively elevated. Further interest rates increase would place additional upward pressure on cap rates. However, rental growth expectations will partially offset this, limiting the magnitude of cap rate expansion. Capital values are expected to continue rising, led by high-quality assets in prime locations where rental growth prospects remain strongest. Tokyo logistics definition

Area

Tokyo, Chiba, Saitama, Kanagawa and southwestern Ibaraki

Gross Floor Area

Historical supply and demand trends tsubo (thousands) 1,000

10%

800

600

400

200

0% 2021

2022

2023

2024

2025 YTD 2026

Net absorption

New supply

50,000 sqm (15,125 tsubo) or more

Built Year

Vacancy rate 2000 or newer

Japan Market Dynamics - Q2 2026

Logistics

Osaka Fundamentals(for this quarter) •

Robust demand continues to outpace supply

•

Vacancy rate expected to remain around 2% amid limited new supply

•

Landlords of existing properties are actively raising rents

Net absorption Completions Vacancy rate Gross rent Rent growth Y-o-Y Stage in rental cycle

55,300 tsubo. 47,800 tsubo. 1.8% JPY 4,338 per tsubo p.m. +3.2% Rents Rising

Note: Osaka logistics refers to the Greater Osaka prime logistics market. Data is on an NLA basis.

Demand from e-commerce and 3PL companies remains robust, with net absorption in Q2 2026 reaching 55,300 tsubo. Demand was broad-based, extending from well-located assets to properties in peripheral areas.

Historical supply and demand trends tsubo (thousands)

New supply totalled 47,800 tsubo across two developments, , one in southern Osaka and the other in Nara. While newly completed space added to vacant stock, leasing activity in existing properties reduced the Greater Osaka vacancy rate by 0.3pp q-o-q to 1.8%.

500

Rents for Greater Osaka reached JPY 4,338 per tsubo per month, up 0.8% q-o-q and 3.2% y-o-y. With vacancy remaining limited and market conditions favoring landlords, some landlords are marketing vacated space at asking rents 10-20% above previous lease levels.

400

While cap rates expanded slightly in line with higher interest rates, rental growth supported a modest increase in capital values. Against the backdrop of rising rates, investors are increasingly favoring properties with strong rental growth prospects.

300

200

100

Outlook: In the leasing market, the vacancy rate is expected to remain at a low level of 1-2%, as new supply in 2026-2027 is projected to fall significantly below 2025 levels and demand continues to hold firm. Future new supply is concentrated in the Kyoto area, with few development plans in other areas. Accordingly, supplydemand conditions are expected to remain exceptionally tight outside the Kyoto area. Additionally, as construction costs continue to rise, rental levels for new properties are expected to keep increasing. Consequently, upward pressure on rents is expected to spread to surrounding existing properties, and rental growth across the overall market is projected to continue.

Osaka logistics definition

Area

Osaka, Hyogo, Kyoto, Shiga and Nara

Gross Floor Area

0 2021

2022

2023

2024

2025

Net absorption

New supply

50,000 sqm (15,125 tsubo) or more

Built Year

YTD 2026

Vacancy rate 2000 or newer

Logistics Retail Office Investment

Japan Market Dynamics - Q2 2026

Retail Logistics Office Logistics

Fukuoka Fundamentals(for this quarter) •

Demand remains sound, driven primarily by e-commerce operators, 3PL providers, and local logistics companies

•

Vacancy rate rises due to large-scale completion, but increase remains limited as existing properties continue to be absorbed

•

Tenant turnover drives rent revisions, underpinning rental growth

In Q2 2026, the vacancy rate in the Greater Fukuoka logistics market reached 9.2%, up 2.1pp q-o-q and 6.1pp y-o-y. Net absorption stood at 21,800 tsubo, falling short of new supply of 36,200 tsubo. During the quarter, three large-scale logistics facilities were completed, primarily in the Tosu area. One of these facilities was delivered in a submarket already experiencing elevated vacancy, and it too was completed with vacancy. Additionally, some existing properties experienced tenant departures. These factors were the primary drivers of the increase in the vacancy rate. Meanwhile, in Kumamoto and Kitakyushu, absorption of relatively new, higher-rent properties continued to progress steadily. Expansion of e-commerce, along with warehousing and distribution needs from manufacturing sectors—particularly semiconductors and automotive—is driving logistics demand across the Kyushu region. Gross rent in Greater Fukuoka stood at JPY 3,623 per tsubo per month, up 1.2% q-o-q and 2.0% y-o-y. During the quarter, newly completed properties pushed up the overall market rent levels. Among existing properties, some landlords raised asking rents above previous levels following tenant departures. Even relatively old properties are being leased at rent levels comparable to new buildings, if they are in superior locations. While vacancy rates have risen in the Tosu area due to increased supply, demand-supply conditions remain tight in areas near Fukuoka IC and other suburbs of Fukuoka City, continuing to support rent growth. In the investment market during the quarter, several acquisitions were made by J-REITs and private funds. The acquired properties were logistics facilities with excellent transport access, indicating that investor appetite for high-quality assets remains sound. Estimate cap rates remained unchanged q-o-q. Outlook Multiple inquiries and some pre-leasing agreements have already been confirmed for properties yet to be completed in 2026, and existing properties continue to see vacancy absorption, indicating that demand remains stable. However, approximately 40,000 tsubo of new supply is scheduled for completion in the second half of the year, primarily in the Tosu area. As a result, tenant selection is expected to intensify further. In addition to location, building specifications, and unitsize flexibility, the availability of subsidy programs may also influence tenant decisions. While the vacancy rate may rise temporarily, rents are expected to maintain a moderate upward trend, particularly for properties with strong tenant demand. Fukuoka logistics definition

Area

Fukuoka and Saga

Gross Floor Area

Net absorption Completions Vacancy rate Gross rent Rent growth Y-o-Y Stage in rental cycle

21,800 tsubo 36,200 tsubo 9.2% JPY 3,623 per tsubo p.m. +2.0% Rents Rising

Note: Fukuoka logistics refers to the Greater Fukuoka prime logistics market. Data is on an NLA basis.

Historical supply and demand trends tsubo (thousands) 100

10%

0% 2021

2022

2023

2024

2025

Net absorption

New supply

30,000 sqm (9,075 tsubo) or more

Built Year

YTD 2026

Vacancy rate 2000 or newer

22 Japan Market Dynamics - Q2 2026

Retail

Retail Office Investment

Japan Market Dynamics - Q2 2026

Retail Office Retail

Tokyo Fundamentals •

A rising stock market is deemed to have stimulated domestic consumption

•

Three buildings added to the development pipeline in Ginza and Omotesando scheduled for completion in 2027- 2029

•

Rental values and capital values continue to grow albeit at a slower pace

Sales of luxury goods at department stores in Tokyo remained robust in April and May. With foreign visitor arrivals continuing to decline in the same term, a rising stock market is deemed to have stimulated domestic consumption. Occupier demand from luxury brands remained healthy in Q2 2026. Notable new openings included Hunting World specialising in apparel on Omotesando. In addition, F&B Smith & Wollensky opened on an upper floor on Chuo-dori in Ginza. No new supply was introduced to the prime retail market of Ginza and Omotesando in Tokyo in Q2 2026. Development projects confirmed in Q2 included the Matsuzawa Building New Construction (GFA 1,400 sqm), due in 2027, the Ginza Trade Building Redevelopment Project (GFA 20,000 sqm), due in 2029 along Chuo-dori, and the Omotesando I Development Project (GFA 1,500 sqm), due in 2028 on Omotesando. Rents reached JPY 112,686 per tsubo per month in Q2 2026, up 3.2% q-o-q and 12.9% y-o-y. Growth moderated slightly. While new store openings by luxury brands have largely run their course, prime spaces continue to attract bidders when they come onto the market. Capital values increased by 3.8% q-o-q and 12.2% y-o-y in Q2. Rental growth continued to underpin capital value appreciation as cap rates remained stable. However, no actual investment transactions were recorded in the prime retail market in Tokyo during the quarter.

Outlook

In the leasing market, the tight supply-demand balance is expected to continue on the back of limited supply of prime spaces sustaining upward pressure on rent growth. However, growth is expected to slow as demand from luxury brands appears to have peaked. In the investment market, cap rates are expected to remain stable for the foreseeable future. On this basis, capital values are projected to continue increasing moderately, primarily supported by rental growth. 23

Gross rent Rent growth Y-o-Y Stage in rental cycle

JPY 112,686 per tsubo p.m. 12.9% Growth Slowing

Note: Financial indicators are for the prime retail markets of Ginza and Omotesando. Data is on an NLA basis. Retail sales growth figures are for Tokyo Prefecture.

Luxury Goods Sales y-o-y 40% 30% 20% 10% 0% 2021

2022

2023

2024

Growth

2025

Jan-May 2026

Source: Japan Department Stores Association Note: Luxury goods refer to art, jewellery, and precious metals © Jones Lang Lasalle IP, Inc. 2026

24 Japan Market Dynamics - Q2 2026

Hotel

Japan Market Dynamics - Q2 2026

Hotel

Tokyo Fundamentals •

Japan Inbound Tourism Declines 5% Y-o-Y in Q2 2026 driven by 58% Drop in Chinese Visitors.

•

No additional international luxury hotel openings were observed in Tokyo in Q2.

•

ADR growth decelerating across all segments.

In H1 2026, foreign visitors to Japan totalled 21,084,345, down 2% Y-o-Y. Q1 growth from Taiwan, Hong Kong, India, and the Middle East offset Chinese visitor declines amid strained bilateral ties. However, Q2 fell across all months, with Chinese visitors down 58% Y-o-Y. Per JNTO, Q1 2026 foreign guest nights in Tokyo rose 8% Y-o-Y, while domestic guest nights fell 3.5%, limiting overall growth to 3%. Domestic stays continued last year's decline. Foreign guests comprised 57.1% of Q1 total, up 2.8 percentage points Y-o-Y. In Q2 2026, several limited-service and apartment hotels opened, while no upscale or higher-tier hotels launched during the quarter. Major luxury and upper-upscale hotel openings are planned: Pullman Tokyo Ginza and Waldorf Astoria Tokyo (2027), Canopy by Hilton Tokyo Akasaka, Dorchester Collection, and Raffles Tokyo (2028), plus Capella and Rosewood (2030) in Roppongi. During H1 2026, hotel performance saw ADR peak in March and April across all segments before a seasonal decline, though Y-o-Y growth continued. Occupancy improved overall, proving that market diversification successfully offset the impact of the decline in Chinese visitors. Compared to the same period last year, the luxury segment maintained an occupancy rate of about 75% despite a slight decline. While ADR growth slowed in other segments, the luxury segment recorded double-digit growth, continuing to show strong pricing power.

YTD room additions RevPAR growth trend Y-o-Y Stage in RevPAR cycle

211 rooms ↑ RevPAR Rising

Note: Tokyo Hotels refer to Tokyo's overall hotel market. Source: JLL, industry sources, STR

Historical new supply trends Rooms 1,500

1,000

500

Outlook

Although geopolitical risks persist, inbound demand is expected to remain robust, supported by the weak yen. While Chinese visitor recovery may lag, growing source markets including European and Southeast Asian markets should mitigate hotel performance impact. Robust inbound demand should sustain ADR growth in 2026, though slower. Recent rapid ADR increases have eroded Tokyo's value advantage versus global markets. Geopolitical risks--Middle East tensions and China-Japan relations--warrant close monitoring. 25

0 2021

2022

2023

2024

2025

YTD 2026

26 Japan Market Dynamics - Q2 2026

Sustainability

Research

Investment Logistics Retail Office Tokyo Logistics Retail Office Sustainability

Japan Market Dynamics - Q2 2026

Hotels | Q3 2024

Green Buildings in Japan Key Metrics

CASBEE-WO: Five projects acquired certification in 2Q26—below the number expiring—decreasing the total number of CASBEEWO-certified projects by 2.5% q-o-q to 196. 27

2,500 2,000 1,500 1,000 500

LEED ～2020

2021

CASBEE-BD 2022

2023

2Q26

1Q26

4Q25

3Q25

0 2Q25

Fitwel: No projects acquired certification in 2Q26, leaving the total number of Fitwel-certified projects unchanged at five for the nineth consecutive quarter.

3,000

2Q26

WELL: Four projects acquired certification in 2Q26, bringing the total number of WELL-certified projects, including undergoing second recertification, totaled 78, increasing 5.4% q-o-q.

3,500

1Q26

CASBEE-RE: Certification was acquired by 151 projects in 2Q26, predominantly in the multi-family sector, increasing the total number of CASBEE-RE-certified projects by 4.2% q-o-q to 3,255.

As companies place greater emphasis on employee health and well-being, demand for third-party certifications that assess building health performance continues to grow. WELL, the world’s most widely adopted health-focused building certification, is distinguished by its balanced evaluation of both building features and operational practices, making it appealing across industries. In 2026, two new programs were introduced: WELL Real Estate Rating, focusing on building features, and WELL Operations Rating, focusing on operational practices. Both are designed for use through WELL at Scale, which enables organizations to apply WELL standards across multiple properties. This offers costeffectiveness and is likely to support broader adoption going forward.

Historical valid green certification by certified year

4Q25

CASBEE-BD: Twenty-one projects acquired certification in 2Q26— below the number expiring—decreasing the total number of CASBEE-BD-certified projects by 1.9% q-o-q to 505.

Special features: Overview and Strategic Utilization of WELL Certification

3Q25

LEED: Fourteen projects acquired certification in 2Q26, bringing the total number of LEED-certified projects since 2009 to 406, representing a 3.6% q-o-q increase.

Note: LEED, WELL and Fitwel refer to all ratings. CASBEE-BD, CASBEE-RE and CASBEEWO refer to B+ and above. Source: JLL, USGBC, IBECs, IWBI, Fitwel

2Q25

The Japanese version of Sustainability Market Dynamics features overview and strategic utilization of WELL certification.

+1.0 %

2Q26

•

Wellness-certified projects (average q-o-q)

1Q26

Wellness certification acquisition increases, with WELL achieving three Platinum certifications for offices.

+2.0 %

4Q25

•

Green-certified projects (average q-o-q)

3Q25

Green building certification acquisition increases, with 14 LEED-certified projects including three newly-built office buildings.

2Q25

•

CASBEE-RE 2024

2025

2026

Source: JLL, USGBC, IBECs

Jones Lang LaSalle K.K. Tokyo Headquarters Kioi Tower, Tokyo Garden Terrace Kioicho 1-3 Kioi-cho Chiyoda-ku, Tokyo 102-0094 +81 3 4361 1800

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Research Head of Research

Office team leader

hiroshi.okubo@jll.com

Senior Director yuto.ohigashi@jll.com

Hiroshi Okubo

Yuto Ohigashi

Office：Osaka/Fukuoka

Haruka Matsumaru

Manager haruka.matsumaru@jll.com

Investment・Logistics team leader

Retail・Data center

Sustainability

Senior Director naoko.iwanaga@jll.com

Senior Manager tomomi.kemmochi@jll.com

Manabu Taniguchi

Naoko Iwanaga

Office：Flexible office

Logistics：Fukuoka

Assistant Manager tomoyo.nakamaru@jll.com

Manager yoko.yamada@jll.com

Senior Director manabu.taniguchi@jll.com

Tomoyo Nakamaru

Tomomi Kemmochi

Yoko Yamada

Hotels & Hospitality Group Head of Advisory

Kuraudo Ohashi

Research at JLL

About JLL

JLL’s research team delivers intelligence, analysis and insight through marketleading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities. Our more than 550 global research professionals track and analyze economic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives. Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions.

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OPYRIGHT © JONES LANG LASALLE IP, INC. 2026 This report has been prepared solely for information purposes and does not necessarily purport to be a complete analysis of the topics discussed, which are inherently unpredictable. It has been based on sources we believe to be reliable, but we have not independently verified those sources and we do not guarantee that the information in the report is accurate or complete. Any views expressed in the report reflect our judgment at this date and are subject to change without notice. Statements that are forward-looking involve known and unknown risks and uncertainties that may cause future realities to be materially different from those implied by such forward-looking statements. Advice we give to clients in particular situations may differ from the views expressed in this report. No investment or other business decisions should be made based solely on the views expressed in this report.