Which segment in Tokyo residential had the most notable shift in Q1 rents?

Average rents increased by 2.3% for smaller units.

Tokyo’s residential rental market is principally made up of compact single-occupier units, typically less than 45 sq m (13.6 tsubo) in size. According to Savills, such units can often make up as much as 75% or more of the 23W area’s rental listings. 

Unlike Western major global cities such as London and New York, house or apartment sharing does not form a major 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:

The most notable shift when looking at size bands in the C5W in Q1/2024 occurred in the smaller 15-30 sq m category. Average rents for smaller units increased by 2.3% QoQ, which should correlate with the general growing shift towards in-office participation. Although many large companies, and more so IT firms, keep hybrid work arrangements in place, a large proportion of workers who can afford to live in the C5W are likely employed by companies that have been mandating greater office attendance, such as finance and consulting firms. 

Therefore, proximity and access to offices are likely a priority for this demographic of renters, in addition to less emphasis on space for home offices. Moreover, a large proportion of this segment of residents likely comprises younger singles, translating into a greater emphasis on smaller and more reasonably priced units. 

Meanwhile, the quarterly performance of units in the medium 30-45 sq m size band was relatively moderate, increasing by 1.4% QoQ, while rents among larger units of 45-60 sq m increased marginally by 0.7% QoQ, with per sq m asking rents of the former sitting marginally above those of units in the smallest size band. 

Although the demand for larger units that can accommodate home offices remains firm for the meantime, the scaling back of hybrid work arrangements may gradually reduce the emphasis for such specifications, which may impact the demand for larger units to some extent moving forward. Also, the premium for large units has become noticeable, possibly discouraging some renters. 

Overall, the C5W remains a popular residential destination due to its proximity to the city centre, availability of amenities, and status, with a recent slew of high-end residential developments that should raise the profile of the submarket.