Grade B office rents in Tokyo rise by 4% in Q1

Shinjuku and Shibuya were the outperformers during the quarter.

The large-scale Grade B market in Tokyo has improved in tandem with the Grade A market according to a Savills report, with average rents growing by 1.3% QoQ and 4.0% YoY to JPY25,891 per tsubo in Q1/2025.

“Shinjuku and Shibuya were the strongest performers this quarter, increasing by 2.0% and 1.8% QoQ respectively, while other wards all saw moderate growth. Given the high levels of demand present in the market, many properties have taken the opportunity to carry out rental increments,” the report said.

Here’s more from Savills:

Average Grade B vacancy levels have likewise improved, decreasing by 0.6ppts QoQ to 1.4ppts YoY to 2.0% in Q1/2025. Shinjuku and Minato have seen the most significant improvements in vacancy, decreasing by 1.4ppts QoQ to 2.5% and 1.1ppts QoQ and 2.7%, respectively. A vast majority of offices in the market are fully occupied, although there are a small number that have elevated vacancies and are the primary contributors to vacancy rates in respective wards.

Overall, the Grade B market has performed well, although it has continued to lag that of the Grade A market slightly. Indeed, the broader office market has seen a return to quality, with tenants placing a heavier emphasis on accessibility and office amenities. As such, older buildings that are in poor locations are likely to continue facing trouble securing tenants at desired rents. Therefore, there are likely value-add opportunities for struggling assets in this sector.

Furthermore, one additional reprieve for the Grade B office market is that a majority of upcoming supply in the pipeline will be Grade A, providing a potential avenue for Grade B offices. Going forward, Grade B supply is likely to continue further shrinking due to elevated construction costs, which should eventually lead to a firmer equilibrium between demand and supply.