3 new office buildings to watch out for in Osaka
The Osaka Umeda Twin Towers South will lead the supply throughout 2022.
In a recent report, Savills reveals that new supply in Osaka looks to be unevenly distributed over the coming years. While supply in 2021 and 2023 is relatively sparse, 2022 and 2024 look to add around 45,000 and 65,000 tsubo of NRA, respectively.
2021’s most notable completion, the Honmachi Sankei Building, is adding about 9,000 tsubo of NRA to the market. While pre-leasing for new buildings this year has been poor, the impact of this will likely be moderate given its size, says Savills.
“The Osaka Umeda Twin Towers South will lead the supply throughout 2022, introducing 28,400 tsubo of high-quality NRA into the Umeda submarket, and has had sound pre-leasing activity. Likewise, another large property coming to the market next year, the Nippon Life Yodoyabashi Building, also appears stable. However, 2024 also looks to add over 60,000 tsubo of additional NRA into Umeda, and it is uncertain if the submarket will be ready to absorb such a large amount.”
Here’s more from Savills:
Investment-grade vacancy rates have increased 0.9ppts YoY to 1.4%. A sizable portion of this is attributed to the S-Building Shin-Osaka that came to the market in late 2020 and remains mostly vacant in part due to its non-ideal location.
All-grade vacancy rates have been gradually increasing since the onset of the pandemic, with a particular uptick in Shin-Osaka. Many new buildings in this submarket have been sitting at low occupancy, evidently the underlying contributor to the high vacancy levels seen in the city.
Given the limited new supply expected in 2021 and sound pre-leasing activity for supply in 2022, alongside a slowdown in COVID-19 cases, the Osaka office market should be able to perform better.
Rents for investment-grade offices in Osaka have decreased 2.2% YoY, and overall, the gains seen in the previous year have effectively been reversed. Indeed, some buildings experiencing vacancies have reduced rents in order to quickly attract new tenants.
After growing throughout the pandemic, rental growth in the all-grade office market has finally petered out. Specifically, Semba and Shinsaibashi have shown contractions of around 3.0% YoY from the highs seen in 2020. However, thanks to continued growth in Umeda and Shin-Osaka, rents in Osaka overall only declined 0.3% YoY to JPY11,900 per tsubo.
Despite the contraction seen over the past year, rental levels are currently overall higher than they were two years ago. Furthermore, rents for investment grade offices in Osaka are over 30% more expensive than they were five years ago in 2016, demonstrating robust growth. However, this high rate of growth has conversely made corrections in rental levels more likely with the economy weakened.