Tokyo Grade A office vacancy rate hits 4-year low in Q1

Vacancy levels slipped to 1.7% during the quarter.

In a recent report, Savills revealed that the Tokyo Grade A office market has continued to grow, beginning the new year supported by strong demand amidst sound economic sentiment in the market.

“Average rents in the C5W increased by 1.8% QoQ and 5.8% YoY to JPY34,544 per tsubo in Q1/2025, and have overall seen multiple consecutive quarters of growth. All members of the C5W saw rental increments, with Shinjuku and Shibuya seeing the strongest gains,” the report said.

Here’s more from Savills:

Demand for office space has been strong, and vacancy levels have improved to show. Vacancy rates decreased by 0.6ppts QoQ and 1.3ppts YoY to 1.7%, the lowest observed in the past four years. Minato saw the largest decrease in vacancy of 2.2ppts QoQ, while other members largely saw consistent improvements over the quarter.

Indeed, the moderate amount of supply in 2024 seems to have given the market time to uneventfully absorb the large supply that came to the market in 2023, with several properties that were struggling with high vacancy rates having attained close to full occupancy.

Nonetheless, a small number of buildings, particularly in the bay areas of Chuo and Minato, still face elevated vacancy levels. That said, other areas in Chuo and Minato are performing well.

While office supply for the C5W in 2025 is forecast to be over double that of 2024, a considerable proportion of this is reported to have already been pre-leased. Furthermore, remote work in Tokyo has been gradually winding down over the past few years. According to a survey conducted by the Tokyo Metropolitan Government, as of December 2024, 43.7% of companies with 30 or more employees had remote work policies, down from 52.4% in 2022 and 46.1% in 2023. In addition, the workforce of Tokyo keeps increasing in number.

Therefore, many companies should find themselves in greater need of quality office space. Competition for labour is stiff in Tokyo, and moving to an office with premium facilities in a good location is one relatively straightforward way to attract and retain talent. Overall, present market dynamics point toward the uneventful absorption of new supply this year.