Rents continue to rise and vacancy remains tight across the C5W, even as
new supply exceeds the historical average.
- Grade A stock in Tokyo’s C5W continues to be in high demand. Vacancy is pushing closer and closer to zero, having declined foreight consecutive quarters, while average rents have increased for the past seven years.
- Average passing rents for Grade A office space in the C5W grew to JPY36,100 per tsubo per month, representing a gain of 2.4% quarter-on-quarter (QoQ) and 7.3% year-on-year (YoY).
- The average Grade A office vacancy rate in the C5W hit 0.3% in Q2/2019, dipping by 0.1 percentage points (ppts) QoQ and by 0.5ppts YoY.
- Average passing rents for large-scale Grade B office space rose to JPY27,632 per tsubo per month, growing by 3.0% QoQ and 7.8% YoY.
- The average large-scale Grade B office vacancy rate stands at 0.4%, ticking up 0.1ppts QoQ but still 0.2ppts lower YoY. For the more cautious, this uptick in vacancy, albeit very slight, might appear as a harbinger of a downward shift in the property cycle.
- The latest JREI survey revealed a consensus that the Tokyo office market cycle is at its peak, but is expected to remain there for at least the next six months.
- Headwinds abound, particularly in the macro-economy, but appear unlikely to affect the office market over the short term as overall demand is sound and pre-leasing has booked up the majority of new supply through 2019.