Tokyo Grade B office rents decline 8.4% in Q3

And vacancy rate hit 3.3%.

Tokyo’s Grade B office rents declined 2.5% QoQ and 8.4% YoY to JPY26,100 per tsubo in the third quarter of 2021. According to Savills, this is similar to the performance of the Grade A market. Meanwhile, vacancies slipped 0.5ppts QoQ and 2.3ppts YoY to 3.3% during the quarter. 

Savills says the ward level trends of Grade B offices are also similar to those observed in the Grade A market, with Shinjuku leading the rental decline this quarter at 5.1% QoQ and Minato leading the vacancy increment at 3.4ppts QoQ. Shinjuku’s rent corrections are mainly a result of higher vacancies in office buildings away from stations. 

“Indeed, accessibility and convenience have become increasingly important attributes for tenants during the pandemic. A similar trend is also present in Minato, and these less accessible buildings have been negatively affecting the overall performance of the ward.”

Going forward, some secondary vacancy may materialise in the Grade B market if tenants looking for higher-end facilities become enticed to make the move to Grade A office buildings, which have become increasingly available and affordable in this downturn.