• Strong demand fromnewofficesetupsandexpansion relocations, thoughlimitedavailabilitymaybeconstraining take-up.
• Vacancyratefallsto1.8%,highlightinganincreasingly tightmarket
• Averagemonthly rent pertsuboreachesJPY28,083,up3.6%q-o-q and14.1%y-o-y.
Netabsorption totalled+3,600tsuboinQ22026.LimitedGradeAavailabilityispushingtenantstowardalternativestrategies:remaining in currentoffices, renovating, orusingflexibleworkspaces.
Therearevirtuallynovacanciesthatmatchrelocation demand. Traditionally, smallerspacescommanded higherper-tsuborents,butthishas reversed premium pricing now appliestolargespacesof500+tsubo.Q22026vacancy ratefellto1.8%,down 0.4ppq-o-q anddown 1.5ppyo-y. Thequartersawnonew supply,andtheabsorption ofvacanciesatYodoyabashi GateTower andGrandFrontOsakaTower Bprimarily contributed tothedecline inthevacancy rate.
Rents averaged JPY28,083pertsubopermonth, up3.6%q-o-q and14.1%y-o-y. Landlordshavemaintained theupperhand, witheven those withvacancies not rushingtoclosedealsbutrathertakingtheirtimetoaimforcontracts athigherrents.Ontheotherhand,rapidrentincreases arecreating newchallenges. Thereisaperception gapbetween tenants' budgetexpectations andtherentlevels landlordsanticipate. Infact, somebuildingshaveexperienced adecline ininquiriesafterraisingaskingrents.
Capitalvaluesincreased by5.6%q-o-q and16.0%y-o-y inQ22026,driven byrisingrents.
Outlook
Theonlynew supplyplanned through2030isthe"TaiseiMidosujiTower" (Chuo-ku,totalfloorareaapproximately 14,000tsubo),scheduled for completion inJuly2026,andthemarketisexpected toremainextremely tight.GradeAofficespaceisbecoming genuinely scarce.Asavailable floordecreases, rentscontinue theirupwardtrajectory, withannualrentalgrowthfor2026forecastatapproximately 12%.
Fundamentals(forthisquarter)
Stage inrental cycle Rents Rising
Note:Financialandphysical indicatorsareforthe5KusGradeAofficemarket.Datais onanNLAbasis.
Historicalsupplyanddemandtrends