Is the rental gap between large and small apartments in Tokyo narrowing?

Analysts say it may be on track for a convergence.

Tokyo’s rental market is principally made up of compact single-occupier units, typically less than 45 sq m (13.6 tsubo) in size. According to a Savills report, such units can often make up as much as 70% or more of the 23W area’s rental listings.

Unlike Western major global cities such as New York and London, house or apartment sharing does not form a meaningful segment of the rental market. As a result, there is a large, stable market for small- to mid-sized units.

Here’s more from Savills:

While average rents increased across all three size bands in the C5W, the smaller 15-30 sq m size band observed the most notable uptick of 6.4% QoQ, followed by the medium 30-45 sq m size band, rising by 4.4% QoQ. Meanwhile, the larger 45-60 sq m size band experienced the most modest increase of 2.6% QoQ.

Overall, the gap that larger sizebands had over smaller ones appears to have narrowed and may be on a trend of convergence as both residents and the market adapt to new lifestyles and residential preferences. Remote working options have become less prolific compared to a few years ago, and the general push toward the office may have reduced the demand for larger living spaces, especially when they are more expensive.

In addition, according to housing starts data published by the Ministry of Land, Industry, Transport, and Tourism (MLIT), comparatively more units of larger size bands, and fewer smaller size-band units were built than in previous years. Indeed, developers appear to have been more incentivised to build larger units to accommodate the shift in demand during the pandemic.

As a result, the proportion of rental housing starts under 30 sq m in the C5W has declined to just 12% of total stock in 2024, down from the 5-year average of 17% between 2019 and 2023. In contrast, the proportion of rental housing starts for larger units has grown to 36%, compared to its 5-year average of 29% over the same period.

Moving forward, the average rents for the different size bands are expected to stabilise as the rental market tightens and the market adapts to new lifestyles and residential preferences.