Office supply in regional Japanese markets in 2025 to exceed 2023 levels

New supply will largely be focused in Minato.

Recovery continues in earnest in the Tokyo Grade A and Grade B office markets in Q4/2024 according to a Savills report, and observers should have a positive outlook for the coming year ahead. Indeed, successive quarters of moderate rental growth and falling vacancy is a clear indication that the office market has reached a new phase, and there has been little deviation to this trend over the past quarter.

“Regional office markets also appear to have a positive outlook, with limited supply forecasts and strong tenant demand likely to help respective markets maintain the current growth momentum. The positive performance of the office market has also helped investors retain their conviction in the sector in 2024,” the report added.

Here’s more from Savills:

Meanwhile, heightened construction costs have put some constraints on market activity. In particular, fit-out costs have risen dramatically and have priced many tenants out of moving, dampening overall relocation activity. This trend has supported the growth of more flexible and affordable office types, such as share offices and satellite offices. Such offices may become a more prominent option for tenants, and could help to breathe new life into struggling non-prime offices, encouraging more widespread recovery in the market.

Looking ahead to 2025, new supply is expected to exceed that of 2023, largely focused in Minato. The ward recently witnessed a large influx of office supply in 2023, which caused some market fluctuations, and such concerns can be extended to 2025, particularly in the Takanawa and Shibaura areas.

Nonetheless, existing major developments have been largely absorbed, and pre-leasing activity has been sound for many incoming developments such as THE LINKPILLAR, which should put more observers at ease moving into the new year.