The Tokyo office market has undergone significant changes in recent years due to diverse working styles, the impact of the pandemic, and economic recovery. In 2023, the vacancy rate in the 23 wards of Tokyo dropped from 6.2% to 5.1%. Notably, the core five wards (Chiyoda, Chuo, Minato, Shinjuku, and Shibuya) saw vacancy rates fall to 4.6%, dipping below 5% for the first time in nearly five years. This is mainly attributed to the steady recovery in office demand from companies driven by business expansion and the search for better locations.
At the same time, the trend of new office supply is drawing attention. Between 2023 and 2025, Tokyo is expected to experience a wave of large-scale office building completions. In particular, 2023 will see a new supply of around 190,000 tsubo (approximately 628,000 square meters), about twice the historical average. In 2025, the supply of Grade A buildings is forecasted to reach a record high. This surge in supply is likely to prompt many companies to reevaluate their office strategies and could accelerate market movements and relocations.
In terms of rental trends, the market has shown moderate growth in recent years, with some areas even experiencing rent increases. For example, in 2018, the overall rental rate in Tokyo rose by 2% compared to the previous quarter, while the vacancy rate hit a historic low of 0.8%, demonstrating high demand at the time. However, looking ahead, factors such as the normalization of remote work, economic uncertainty, and the expected large supply of new offices may put downward pressure on rents.
In summary, while the Tokyo office market is in a phase of recovery, it still faces several challenges. Companies must closely monitor market trends and adopt flexible and forward-thinking office strategies to adapt to the rapidly evolving workspace needs and economic landscape.
