Tokyo Grade B office rental growth strengthens by 6.8% in Q2

Chuo saw the biggest rental growth during the quarter.

The large-scale Grade B market strengthened in parallel with the Grade A market, with average rents growing by 3.2% QoQ and 6.8% YoY to JPY26,717 per tsubo in Q2/2025, according to a recent Savills report. Chuo saw the strongest growth in average rents, increasing by 5.6% QoQ while Shinjuku also witnessed notable rental growth at 4.5% QoQ.

“Shinjuku’s Grade B offices have the narrowest rental discount relative to its Grade A offices, which experienced limited new supply in recent decades, supporting the firm overall demand for the Grade B offices in the ward. All other wards also experienced rental growth over the quarter,” the report added.

Here’s more from Savills:

On an annual basis, Shibuya experienced the strongest rental growth of 9.6%. Indeed, the scarcity of available space in Shibuya’s Grade A office market has likely resulted in positive spillover effects to its Grade B offices, supported by robust demand, particularly from startups and technology companies.

Average vacancy levels for Grade B offices decreased by 0.6ppts QoQ and 1.2ppts YoY to 1.4% in Q2/2025. Shinjuku experienced the greatest improvement over the quarter, with vacancy tightening by 0.8% QoQ. Minato and Chiyoda also recorded notable vacancy decrease of 0.6% QoQ. Minato has made clear progress over the year, recording an impressive 3.5ppts YoY decrease in vacancy, a significant improvement from its elevated vacancy rate of over 10% just two years ago. A large majority of offices in the market are at full occupancy with just a small number of struggling buildings contributing to the elevated vacancies in respective wards.

Looking forward, a significant majority of new office supply in Tokyo is expected to be Grade A as they are more resilient in absorbing increased construction and land costs due to their greater potential for higher rents. The lower new supply of Grade B offices should provide a tighter balance between demand and supply.