TokyoOffice MarketSummary
Vacancy Rates Decline, Rents Turn Positive for the First Time in Four Years
Economy
AccordingtotheTankanSurveyinMarch,the diffusionindexoflargemanufacturerswas11, thefirstdeclineinfourquartersduetostalled productionintheautosector.Theindexoflarge non-manufacturerswas34,whichmarkedan eighthquarterlyincreaseinarowtoa33-year recordhighduetorecoveryofinbounddemand.
DemandandSupply
In1Q24,netabsorptionintheGradeAoffice marketinTokyowas49,700sqm. Eventhough therewerenocompletionsthisquarter,take-up inexistingbuildingswasseenasdemandfor officeisrobust.
Byindustry,thefigurewasdrivenbyinformation andcommunications,energy,financeand insuranceandmanufacturing.
Physicalindicators
For2019 to2023,take-up,completionsandvacancyrateareyear-end figures.Futuresupply reflectsfiguresfor2024.
Source:JLL,Q12024
Tokyo’s vacancy rate in the Grade A office market in 1Q24 averaged 4.2%, a 40-bps q-o-q decrease and no change on a y-o-y basis. This was the third consecutive decline in vacancy rates By sub-market, the vacancy rate fell in Otemachi/Marunouchi, while unchanged in Akasaka/Roppongi
©2024 JonesLangLaSalleIP,Inc.Allrightsreserved. 1 | Tokyo Office Market Summary
Japan Research|
-1 0 1 2 3 4 5 6 7 8 -100 0 100 200 300 400 500 600 700 800 2019 2020 2021 2022 2023 2024 Percent (%) Thousand sqm Take-up(net) Completions FutureSupply VacancyRate
Q1 2024 May 2024
Capital Values Increase Due to Positive Rental
Growth
AssetPerformance
Rents in Tokyo’s GradeA office market averaged JPY 33,860 per tsubo, per month, at the end of 1Q24, rising 09% q-o-q and falling 1 3% y-o-y Rents rose for the first time in 16 quarters In terms of submarkets, rents fell in Otemachi/ MarunouchiandroseinAkasaka/Roppongi
Capital values in 1Q24 rose for the first time in four quarters up 2 1% q-o-q and down 1 4% y-oy This reflected positive rent growth while cap ratesremainedstable
InvestmentMarket
The office investment volume in Tokyo was JPY 700 billion in 1Q24. This was a 1,079% q-o-q increase and up 50% y-o-y Notable Grade A office transactions this quarter included the acquisition of a strata of Toranomon Hills Business Tower by United Urban Investment Corporation for JPY 8 billion at an expected NOI of3 3%
FinancialIndices
Source:JLL,Q12024
Outlook
According to Oxford Economics’ forecast as of March 2024, the real GDP growth for full year 2024 is 0.5% and the forecast for CPI is 1.9%. Risks include additional interest rate hikes by the BOJ, a downturn in overseas economies, inflation,andvolatilityinfinancialmarkets
Leasing volumein 2024 is expected to slow from the prior year as relatively few projects are scheduled for completion However, since a large amount of new supply will be completed in2025, leasing volumesareexpectedtorecover from the latter half of 2024 Also, due to decline of vacancy, rents are expected to gradually recover
Capital values, with rents projected to rise and capratesunchanged,willgraduallyincrease
Property Clock
Source:JLL,Q12024
©2024 JonesLangLaSalleIP,Inc.Allrightsreserved. 2 | Tokyo Office Market Summary 80 90 100 110 4Q19 4Q20 4Q21 4Q22 4Q23 4Q24F 4Q19 = 100 RentalValueIndex CapitalValueIndex
KeyPerformanceIndicators
Source: JLL,Q12024
Note1:VacancyrateandrentsrefertoTokyoGradeAofficemarket.The definitionofGradeAisasbelowthetable.
Note2:PropertyclockbasedonrentsforGradeAspaceinCBDor equivalent.
Note3:InvestmentvolumereferstoTokyoprefecture’sofficedirect commercialrealestateinvestmentvolume.
TokyoGradeAofficedefinition Area
DesignatedascentralTokyo businessdistrict(Chiyoda,Minato, Chuo,ShinjukuandShibuyawards)
©2024 JonesLangLaSalleIP,Inc.Allrightsreserved. 3 | Tokyo Office Market Summary
Vacancyrate Q-o-Q Y-o-Y GradeAoffice 4.2% -40bps 0bps Rents pertsubopermonth Q-o-Q Y-o-Y GradeAoffice JPY33,860 +0.9% -1.3% Occupationalmarket Investment volume Q-o-Q Y-o-Y TokyoOffice Q12024 JPY700.6 billon +1,079% +50% Investmentmarket
Grossfloorarea 30,000 sqm(9,075tsubo)ormore Typicalfloorplate 1,000sqmormore BuiltYear Since1990
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OsakaOffice Nippon Life
Yodoyabashi Building 3-5-29KitahamaChuo-ku, Osaka541-0041 +81676628400
NagoyaOffice
JPTowerNagoya 1-1-1Meieki Nakamura-ku,Nagoya-shi
Aichi450-6321 +81528563357
Contact
TakeshiAkagi HeadofResearch Research -Japan takeshi.akagi@jll.com
TomoyoNakamaru AssistantManager Research -Japan tomoyo.nakamaru@jll.com
YutoOhigashi Senior Director Research-Japan yuto.ohigashi@jll.com
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