Central Tokyo residential rental premium widens to 22.4% in Q1

It increased by 0.7 ppts from 2025.

Tokyo’s residential leasing market recorded continued rental growth in Q1 2026, with most wards across the Tokyo 23 wards (23W) and central five wards (C5W) posting increases, according to Savills.

Savills said the market remains underpinned by steady wage growth and resilient demographic trends. Net migration into the 23W stayed positive in 2025 at 95,000 residents, although slightly below 2024 levels. A modest net outflow of 2,100 people in Q1 2026 is expected to be temporary, with the spring moving season likely to drive renewed inflows.

Wage growth continues to support rental demand. Savills noted that early 2026 Shunto negotiations indicate a third consecutive year of wage increases exceeding 5%, while real wages turned positive year-on-year in early 2026. However, rising energy costs may weigh on real income growth in the near term.

In central locations, the C5W rental premium widened to 22.4% in Q1 2026, up 0.7 percentage points from the 2025 average over the quarter, reflecting sustained demand from high-income professionals seeking proximity to central business districts, Savills said. Larger units, particularly in the 45–60 sq m range, are commanding higher premiums due to limited supply and ongoing demand for home office space.

Savills added that rental growth is becoming more uneven. Households with weaker wage gains are increasingly facing affordability pressures, prompting a shift toward more affordable outer wards. These peripheral areas have seen stronger migration trends and notable rental growth in recent quarters.

On the supply side, elevated construction and land costs continue to constrain new development. Data cited by Savills from the Real Estate Economic Institute shows average new condominium prices in the 23W reached JPY2.17 million per sq m as of February 2026, nearly double 2019 levels. With borrowing costs expected to rise, more households may turn to renting, further supporting leasing demand.