New office supply in Japan’s regional markets to be moderate in 2025

This should allow existing supply to be absorbed.

In a recent report, Savills said sound improvements have continued in Japan’s regional office markets in the second half of 2024. This comes against the backdrop of moderate economic growth, strong corporate performance, and labour shortages.

“Indeed, many firms have been keen to expand on their business operations and headcounts, and many companies have expanded their offices in modern properties in prime locations. As such, office leasing markets have been strong overall,” the report added.

Here’s more from Savills:

New office supply in 2024 has been elevated, but has nonetheless been received well overall. Tenants have needed to move quickly to lease modern office space with superior amenities, resulting in strong leasing performance among many new properties despite the higher rents. Looking ahead, new office supply in 2025 is forecast to be moderate by comparison in most markets, which should provide breathing room for the absorption of existing vacant space and further improvements in respective office markets.

Meanwhile, the heightened cost of construction will likely constrain office supply moving forward. This should be a silver lining for office leasing markets, by spacing out new office completions and reducing the impact of new supply on respective vacancy rates.

Overall, the performance of regional office markets has continued to improve in 2024. Modern office space in prime locations is highly sought after given the need to attract workers, and should ensure the smooth absorption of the incoming moderate office supply in 2025 with minimal fluctuations. As such, vacancy should continue to fall, with sound prospects of further moderate rental growth.