Tokyo Grade B office rents increase by 4.1% in Q4

Shibuya saw the biggest rental growth.

Tokyo’s large-scale Grade B market also followed the Grade A sector’s moderate growth trajectory. According to data from Savills, Grade B average rents increased by 1.6% QoQ to JPY25,548 per tsubo in Q4/2024, a yearly increment of 4.1%.

“The greatest improvement over the quarter was seen in Shibuya, with rents increasing by 4.1% QoQ. A handful of well-performing properties with very low levels of vacancy carried out rental hikes across the ward, demonstrating the strength of tenant demand in Shibuya,” the report said.

Here’s more from Savills:

Likewise, average Grade B vacancy made some improvements, decreasing by 0.3ppts QoQ to 2.6%, a yearly decrease of 1.0ppts. Performance differed by market, with marked improvements noted in Minato, while Chuo saw some marginal increments in vacancy in a handful of buildings, potentially due to some tenants looking to upgrade to more premium offices.

Overall, the Grade B market still has some room for improvement, and quarterly rental growth was more moderate than that of the Grade A market. Given the large pipeline of office completions especially in 2025, secondary vacancy may be of concern, and bifurcation in the performance of premium properties and older buildings in less convenient areas will likely continue for the meantime.

That said, as the Tokyo office market continues to bounce back and tighten, even struggling properties should see more progress. Moreover, many value-add opportunities exist in this grade, with flexible and cost-effective office arrangements such as share offices and satellite offices gaining traction, particularly among smaller companies, although such options would require efficient space utilisation and thoughtful capital expenditure.