Why the Tokyo office market is set for a continued upward trajectory

A combination of factors is at play.

The C5W Tokyo office market continues to show signs of robust activity, experiencing consistent rental growth, albeit still below pre-pandemic levels, showing room for further upside.

According to a Savills report, although flexible work arrangements continue to take hold, the return to office trend continues, and many companies have designated 2025 as the year for a full return to the office.

“Vacancies are approaching tight pre-pandemic levels, demonstrating an overall sense of scarcity for office space, especially for large companies, many of which are facing limited large-scale stock options. Robust demand for new office space with modern amenities fuelled strong pre-leasing, leading to large completions entering the market with full or high occupancy, and this momentum is expected to continue,” the report said.

Here’s more from Savills:

While the office market remains exceptionally strong, leasing practices are evolving. The adoption of furnished, setup, and satellite offices has been rising steadily. Once mostly limited to medium-sized buildings, these offerings are now expanding into large-scale properties and are no longer concentrated in startup hubs in Shibuya but are spreading across the broader office market.

Additionally, the pandemic has accelerated flexible work arrangements, prompting even large companies to consider opening satellite offices in the peripheral wards alongside their main headquarters in the C5W to enhance convenience for employees by shortening commutes. Rising construction costs is one of the key drivers for this trend, especially for relocating companies, where office setup costs and time required represent a significant burden.

Corporate performance looks strong, with quarterly corporate profits in Q2/2025 hitting an all-time high at JPY35.8 trillion, slightly above the previous peak in Q2/2024, supporting elevated overall stock price. Mergers and acquisitions deal volumes in Japan hit record levels, surpassing JPY30 trillion in the first half of 2025, driven by major corporate activity.

Many companies have undertaken reorganisations to support global expansion, reflecting a broader trend of Japanese corporates strategically repositioning themselves for international growth. Coupled with consistent wage growth, these factors should bode well for the office market.

Overall, the combination of limited new supply, strong tenant appetite, and a growing sense of scarcity in prime assets is likely to keep the C5W Tokyo office market on an upward trajectory.