Q2
2024 July 2024
Strong Recovery in Vacancy Rates Exceed Expectations and Rent Increases Continue
Economy
According to the Tankan Survey in June, the diffusion index of large manufacturers rose to 13 due to the recovery of sectors related to raw materials and contribution of AI-driven demand, and was up the second consecutive quarter in a row . The index of large non-manufacturers was 33 and fell for the first time in four years due to decline in personal consumption and labor shortage.
Demand and Supply
In 2Q24, net absorption in the Grade A office market in Tokyo rose to 119,000 sqm. Two Grade A office buildings entered the market in 2Q24, namely Shibuya AXSH (NLA: 24,960 sqm) and Akasaka Green Cross (NLA: 35,320 sqm).
By industry, the figure was driven by information and communications, energy, and finance and insurance.
Physical indicators
For 2019 to 2023, take-up, completions and vacancy rate are year-end figures. For 2023, take-up, completions and vacancy rate are as at 2Q24. Future supply is for the remainder of 2024.
Source: JLL, Q2 2024
Tokyo’s vacancy rate in the Grade A office market in 2Q24 averaged 3.6%, down 60 bps qo-q and 120 bps y-o-y. However, by sub-market, the vacancy rate rose slightly in both Otemachi/Marunouchi and Akasaka/Roppongi due to new supply
A Further Rise in Capital Values is Expected
Asset Performance
Rents in Tokyo’s Grade A office market averaged JPY 34,224 per tsubo, per month, rising 1.1% qo-q and 0 9% y-o-y by end-2Q24 Rents turned positive in Otemachi/Marunouchi and rose for a second consecutive quarter in Akasaka/Roppongi and rent recovery was seen across the central business district
Capital values in 2Q24 rose 1.8% q-o-q for the second quarter in a row and were up 1 9% y-o-y This reflected the positive rent growth and stable cap rates
Investment Market
The office investment volume in Tokyo totaled JPY 203.4 billion in 2Q24. In local currency terms, this was a 71% q-o-q decrease and rise of 50% y-o-y. Notable Grade A office transactions that closed this quarter include Roppongi Hills Mori Tower, acquired by FPG (18th and 21st floors with 8,700 sqm) for JPY 2 8 billion
Outlook
According to Oxford Economics’ forecast as of June 2024, the GDP growth for 2024 is 0 4% and the CPI is 2 2% Risks include continuous inflation, volatility in financial markets and the upward pressure on investment yields that may be caused by an interest rate hike by the Bank of Japan at the next monetary policy meeting
Leasing volume is expected to be robust despite the relatively few scheduled projects remaining for completion in 2024. Tenant demand for both existing supply as well as new supply is expected to contribute to rent recovery
Capital values are projected to rise on the back of continued rising rents next year and cap rates remaining unchanged, although a hike in the risk-free rate is expected in the latter half of the year
Source: JLL, Q2 2024
Source: JLL, Q2 2024
Fukuoka
Key Performance Indicators
Note 1: Vacancy rate and rents refer to Tokyo Grade A office market. The definition of Grade A is as below the table.
Note 2: Property clock based on rents for Grade A space in CBD or equivalent.
Note 3: Investment volume refers to Tokyo prefecture’s office direct commercial real estate investment volume.
Source: JLL, Q2 2024 Tokyo Grade A office definition Area
Jones Lang LaSalle K.K.
Tokyo Headquarters Kioi Tower, Tokyo Garden Terrace Kioicho
1-3 Kioi-cho Chiyoda-ku, Tokyo 102-0094
+81 3 4361 1800
Fukuoka Office
Daihakata Bldg.
2-20-1 Hakata-ekimae, Hakata-ku, Fukuoka-shi Fukuoka 812-0011
+81 92 233 6801
Osaka Office Nippon Life
Yodoyabashi Building
3-5-29 Kitahama Chuo-ku, Osaka 541-0041
+81 6 7662 8400
Nagoya Office
JP Tower Nagoya 1-1-1 Meieki
Nakamura-ku, Nagoya-shi
Aichi 450-6321
+81 52 856 3357
Contact
Takeshi Akagi Head of Research Research - Japan takeshi.akagi@jll.com
Tomoyo Nakamaru Assistant Manager Research - Japan tomoyo.nakamaru@jll.com
Yuto Ohigashi Senior Director Research - Japan yuto.ohigashi@jll.com
About JLL
For over 200 years, JLL (NYSE: JLL), a leading global commercial real estate and investment management company, has helped clients buy, build, occupy, manage and invest in a variety of commercial, industrial, hotel, residential and retail properties A Fortune 500® company with annual revenue of $20 8 billion and operations in over 80 countries around the world, our more than 108,000 employees bring the power of a global platform combined with local expertise Driven by our purpose to shape the future of real estate for a better world, we help our clients, people and communities SEE A BRIGHTER WAYSM JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated For further information, visitjll com
About JLL Research
JLL’s research team delivers intelligence, analysis and insight through marketleading reports and services that illuminate today’s commercial real estate dynamics and identify tomorrow’s challenges and opportunities Our more than 550 global research professionals track and analyze economic and property trends and forecast future conditions in over 60 countries, producing unrivalled local and global perspectives Our research and expertise, fueled by real-time information and innovative thinking around the world, creates a competitive advantage for our clients and drives successful strategies and optimal real estate decisions
