Rents increased by 4.9% by the end of the quarter.
Tokyo’s Office Market Sees Steady Rental Growth
In its latest report, JLL announced that Tokyo’s Grade A office market experienced an uptick in rents, averaging JPY 35,520 per tsubo per month. This reflects a quarter-on-quarter increase of 1.4% and a year-on-year rise of 4.9% as of the end of Q1 2025. Notably, both the Akasaka/Roppongi and Otemachi/Marunouchi sub-markets showcased considerable growth in rental prices.
Capital Values Surge
Capital values also witnessed a favorable upward trend, with a 3.0% increase quarter-on-quarter and an impressive 8.3% year-on-year. This growth is attributed to the consistent rise in rents alongside stable cap rates from the previous quarter. A highlight of the market was the acquisition of Otemachi One Tower by Nippon Life Insurance Company, signaling strong investor confidence.
Market Indicators Shine
Further insights from the March Tankan Survey revealed a slight decline in the diffusion index of large manufacturers, which dipped 2 points to 12—marking its first drop in four quarters. In contrast, large non-manufacturers enjoyed a boost, with their index climbing 2 points to 35, buoyed by increasing inbound demand.
Vacancy Rates Continue to Drop
In an encouraging sign for landlords, net absorption in Tokyo’s Grade A office market reached 370,000 sqm in Q1 2025, largely fueled by sectors such as services, information & communications, transport & postal services, and manufacturing. The vacancy rate for Grade A office spaces averaged an impressive 2.5%, declining by 30 basis points quarterly and 170 basis points year-on-year. Specifically, the Akasaka/Roppongi sub-market saw a particularly sharp decrease in vacancy levels.
Positive Projections Ahead
Looking ahead, Oxford Economics forecasts a GDP growth of 1.0% for the remainder of 2025 and a CPI increase of 2.7%. The market does face risks from potential tariff impacts on corporate activities and office demand; however, leasing volumes are anticipated to surpass current levels fueled by robust demand and a healthy supply of office space. Capital values are expected to rise, offsetting any shifts in cap rates, which are predicted to remain stable.
In a world where the office life is often compared to a game of chess, it seems Tokyo’s strategy is paying off nicely!
Questions & Answers
What was the average rent in Tokyo’s Grade A office market by the end of Q1 2025?
The average rent was JPY 35,520 per tsubo per month, marking a 1.4% increase quarter-on-quarter and 4.9% year-on-year.
What drove the net absorption in Tokyo’s Grade A office market during Q1 2025?
The net absorption of 370,000 sqm was primarily driven by sectors such as services, information & communications, transport & postal services, and manufacturing.
What are the predictions for future capital values and rents?
Capital values are projected to rise alongside rent increases, which are expected to continue, while cap rates are likely to remain stable.
AloJapan.com