- Investment-grade offices have seen moderate improvements in rents, rising half-year-on-half-year (HoH) in Osaka, Nagoya, and Fukuoka. Vacancy varied slightly, tightening in Nagoya and Fukuoka, while loosening marginally in Osaka.
- All-grade office rental changes remained on a positive trajectory over the past half-year, while vacancy remained stable, with a number of instances of tightening observed.
- Grade A office cap rates tightened marginally in Nagoya, Sendai, and Sapporo in 1H/2024, and were unchanged elsewhere. Overall, cap rates remain relatively tight across all regional submarkets.
- Overall investment volumes in 2023 lag those of the same period in 2022 by nearly 10%, while the office market saw a greater decline in transaction volumes by 35% over the year.
- 2024 will be a major year for new supply, with several large, mixed-use developments slated for completion, notably in Osaka, Fukuoka, and Sapporo.
- Large amounts of new supply will be added to the Osaka and Fukuoka markets in 2024 and 2025, with some observers concerned about potential fluctuations. That said, strong business sentiment has also contributed to sound pre-leasing activity.
Positive trajectory overall, though temporary weakness may be triggered by large supply
Regional office markets continue to make improvements, largely due to heightened business sentiment, greater levels of office participation, and long overdue office relocations. Though large amounts of supply are in the pipeline for many regional markets, sound demand from tenants should ensure stable absorption and only temporal fluctuations in respective markets.
Savills Research & Consultancy