Tokyo Grade A office rents up 8.3% in Q2

Shinjuku outperformed all other areas for the third straight quarter.

The Tokyo Grade A office market continues to progress well, supported by consistent strong demand from continued business expansion. According to a report from Savills, average rents in the C5W grew by 3.4% QoQ and 8.3% YoY to JPY35,723 per tsubo in Q2/2025.

“Shinjuku was the best performer in terms of quarterly rental growth for the third consecutive quarter. All constituent wards saw rental growth on both a quarterly and annual basis, demonstrating the unwavering strength of the overall Grade A office market,” the report said.

Here’s more from Savills:

Vacancy levels continue to tighten across all C5Ws, falling by 0.2ppts QoQ and 1.4ppts YoY to 1.5%. Shinjuku witnessed the strongest quarterly tightening of 0.5ppts. Notably, Shibuya and Chiyoda’s vacancy rates have improved beyond pre-pandemic levels, with the former having almost zero vacancies. All other wards also saw a decrease in vacancy over the quarter, albeit still with some room for improvement, potentially benefitting from spillover demand.

Overall demand for office spaces remained strong, signalling that the significant supply in 2025 should be well absorbed. However, bifurcation continues, with newer buildings in convenient areas continuing to attract strong tenant interest while older assets in less accessible areas, such as those in the bay areas of Tokyo, continue to face lingering elevated vacancy levels.

The office supply forecast for the C5W market in 2025 is about 30% lower compared to the forecast in 2024, largely due to delays to office development. This bodes well for the office market as the new supply is now more evenly distributed between 2025 and 2026, reducing overall fluctuations in the market. In addition, a notable proportion of the supply in 2025 has been pre-leased, confirming the strength of the overall office market.

According to a survey conducted by the Tokyo Metropolitan Government, the proportion of companies with 30 or more employees that have implemented remote working policies sits at 43.2% as of April 2025, slightly down from 46.7% in 2023 and 46.9% in 2022. The labour shortage will continue to drive demand for large modern office spaces in accessible locations with premium amenities, as companies compete to attract talent. Overall, supply absorption in 2025 is expected to remain steady, supported by the strong demand in the office market.