Tokyo’s Grade A office market continues its strong recovery in Q4 2024, with rents seeing a 4.2% year-on-year increase, according to a recent report by Savills. This growth is fueled by robust economic expansion, positive business sentiment, and increased corporate relocations and expansions. The average office rent in the Central 5 Wards (C5W) reached JPY 33,947 per tsubo in Q4, a 2.0% increase from the previous quarter. This marks a steady climb towards pre-pandemic rental levels.
Among the C5W, Shinjuku, Shibuya, and Chuo experienced the most significant rental growth, highlighting the area’s strong appeal to businesses. The overall vacancy rate in the market also improved, dropping by 0.8 percentage points quarter-on-quarter to 2.3%, which represents a 0.9 percentage point decline from the previous year. However, Minato, which has seen an influx of new office supply, continues to face slightly higher vacancy rates due to an oversupply of space and expected new completions in the upcoming year.
The demand for modern Grade A offices remains robust, with tenants increasingly relocating to newer properties. A September 2024 survey by Mitsubishi Real Estate Services found that over 60% of tenants who relocated chose buildings less than 20 years old or opted for properties currently under development. This trend is partly driven by labor shortages, with many companies seeking offices that offer premium amenities and enhanced productivity features to attract and retain employees.
As high-quality office spaces become increasingly scarce, the demand for premium-grade properties is expected to remain strong, providing stability in the market even as rental levels continue to rise. This growing demand for modern, well-located office spaces suggests a positive outlook for Tokyo’s Grade A office market in the coming years.
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