The corporate world is buzzing, and Tokyo’s office leasing market is feeling the effects. According to the latest insights from JLL, a robust demand from companies is set to keep leasing volumes strong in the latter half of the year. The appetite for office space continues to grow, even as external risks loom, such as tariffs and global economic slowdowns. It seems that in the fast-paced landscape of corporate Japan, many businesses see their future as firmly grounded in tangible office spaces.
Positive Predictions Amid Market Fluctuations
Recently, Oxford Economics provided a forecast indicating a modest GDP growth of 0.8% by the end of 2025, alongside a consumer price index (CPI) prediction of 2.8%. While these figures paint a picture of stability, they come with caveats, primarily from potential tariffs affecting corporate activity and a possible downturn in overseas economies.
Demand for Quality Office Spaces is Sky-High
JLL’s report highlights that demand for existing office buildings remains resilient due to a substantial influx of headcounts and a trend toward high-quality relocations. In fact, net absorption in the Tokyo office market reached 30,816 square meters in Q2 2025, driven by significant activity in the information services, wholesale, retail trade, and professional services sectors. You could say the Tokyo office market is the land of opportunity—just without the neon lights.
Rents Continue their Relentless Climb
As companies vie for the best locations, rents have skyrocketed for six consecutive quarters. By the end of Q2 2025, average rents stood at JPY 36,237 per tsubo per month, marking a 2.0% quarterly increase and a striking 5.9% increase year-on-year. The Akasaka/Roppongi and Otemachi/Marunouchi areas, known for their premium real estate, have reported particularly tight vacancies and landlord-friendly market conditions.
Vacancy Rates Plummet in Prime Locations
Tokyo’s Grade A office vacancy rate averaged just 2.4% in Q2, reflecting a decline of 10 basis points quarter-on-quarter and 120 basis points year-on-year. The Otemachi/Marunouchi and Akasaka/Roppongi submarkets are seeing availability shrink to nearly non-existent levels, signaling that demand significantly outpaces supply.
Capital Values Surge Despite Economic Uncertainty
In line with rising rents, capital values in Q2 2025 rose 2.9% quarter-on-quarter and 9.5% year-on-year. This upswing can be attributed to the impenetrable ongoing demand and stable cap rates observed throughout the quarter. A standout transaction this quarter was Mitsubishi Estate’s acquisition of the Akasaka Park Building—a move that underscores the enduring allure of Tokyo’s real estate market.
Questions & Answers
What factors are contributing to the strong demand for office leasing in Tokyo?
The strong demand can be attributed to increased headcount within corporations and a tendency towards relocating to higher-quality office spaces, driven by an appetite for premium environments.
How have rental rates changed in Tokyo’s office market?
Rentals have climbed for six consecutive quarters, with averages reaching JPY 36,237 per tsubo per month by Q2 2025, marking a 5.9% year-on-year increase.
What are the implications of plummeting vacancy rates in key submarkets?
The declining vacancy rates in districts like Otemachi/Marunouchi indicate a significant demand-supply imbalance, with nearly no space left available, making it a landlord’s market.
AloJapan.com