Tokyo
• Limitednewsupplyandflighttoqualitykeepsnet absorptionpositive.
• Netabsorption amounted to+291,000sqmandvacancy ratefallsbelow3%.
• Strong demand underthelowunemployment condition leadsrentscontinue toriseforafourthquarterinarow.
According totheTankanSurveyinDecember, thediffusionindex of largemanufacturersrosefrom13during theprevious quarterto14, thefirstriseintwoquarters.Theindex oflargenon-manufacturers fell 1point to33.Strong appetite forleasesinbothexistingsupplyand pre-commitments wereseen. NetabsorptionintheGradeAoffice marketinTokyo was31,000sqminQ4.Byindustry,thefigurewas driven byinformation andcommunications, manufacturingand finance andinsurance.
NonewGradeAofficebuildingswere completed inQ42024.Tokyo's vacancy rateintheGradeAofficemarketinQ42024averaged 2.8% andfell30bpsq-o-q and180bpsy-o-y. Bysubmarket,thevacancy ratefellsignificantlyinbothOtemachi/Marunouchiand Akasaka/Roppongi.
Rents inTokyo's GradeAofficemarketaveraged JPY35,042per tsubo,permonth, up1.2%q-o-q and4.4%y-o-ybyend-Q4 2024.
Rentscontinued toincreaseinbothAkasaka/Roppongi and Otemachi/Marunouchi, particularlyinthelatter.CapitalvaluesinQ4 rose1.9%q-o-q and7.3%y-o-y, supported byriseinrents andascap ratesareunchanged fromQ32024.Notabletransactionsincluded BlackstoneGroup'sacquisitionofTokyo GardenTerrace Kioicho for JPY400billion,closingin2025.
Outlook
According toOxfordEconomics' forecastasofDecember 2024, expected GDPgrowthin2025is1.2%,whiletheforecastforCPIin 2024wasunchanged at1.6%.Risksincludeinflation, volatilityin financialmarketsandpoliticaluncertainty. Leasingvolumesinthe nextyearareexpected tooutpace thisyearasthedemand-supply balanceremains tightandrentincreasesareexpected toshowno signsofabating.Capitalvaluesareexpected tocontinue torisewith capratesexpected toremainatlowlevels.
Fundamentals
Full-year 2024netabsorption
2024completions
s.m.
Note:Financialandphysical indicatorsareforthe5KusGradeAofficemarket.Datais onanNLAbasis.
Historicalsupplyanddemandtrends
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