Exploring the investment potential of Tokyo’s office market

Recovery has not been evenly distributed across the five central wards.

The Tokyo office market has made steady progress in recovering from the trough experienced during the pandemic. However, Savills noted in a report that recovery and growth have not been evenly distributed throughout the five central wards. For instance, at the ward level, Shibuya has recovered close to pre-pandemic levels, while Shinjuku still lags considerably behind.

Naturally, at the individual property level, the divergence between buildings is even greater in general. At first glance, it appears that market dynamics have evolved over the past few years.

Here’s more from Savills:

Present rhetoric in the post-pandemic office market revolves around immutable qualities of office buildings, including location and building age, and how these factors have come to play an increasingly important role in the performance of the property.

In order to quantify the impact that these factors, location, and building age, have had on office rents, Savills has conducted a linear regression analysis with the distance in minutes to Tokyo and Shibuya stations, and building age, using Grade A and large-sized Grade B offices as the observations, and compared the results over three different time periods – Q2/2020 (prepandemic peak), Q2/2023 (pandemic trough), and Q1/2025.

The results of the linear regression show that at the Tokyo office market’s pre-pandemic peak in Q2/2020, these three factors produced an R-squared value of 0.64, showing that the distance from Tokyo and Shibuya stations, and age do have a certain degree of correlation (negative) between rents. At the same time, there are many other factors at play that influenced office rents, which likely include the quality of the building, available amenities, and building management.

The same regression conducted during the pandemic trough of Q2/2023 and Q1/2025 both produced R-squared values of 0.65. To wit, the significance that location and age play on rents has likely only increased slightly over the past few years, if at all, despite the turbulence of the pandemic.

Overall, this can be good news for some strategic players looking to enter the office market. Investors with underperforming assets, by appropriate asset management and capital expenditure on properties will likely increase the value of the property, and consequently rents.

While the broader office market is strong at present, there are still a handful of assets that are struggling with high vacancy rates, suggesting that there are a number of plays for strategic investors to make. This should be the preferred case in the context of elevated construction costs and evolving work cultures.