Rents at highest level in the past decade, but flattening ahead of large new supply
On May 19, Colliers Japan released "Osaka Office Market Q1 2022 review and outlook". This report is based on Colliers Japan's analysis of the rental office market and future outlook for Grade A office buildings in central Osaka based on data collected independently by Colliers Japan.
Insights & recommendations
Grade A rents in central Osaka have been rising since the late 2010s, but the pace of increase has slowed. Large-scale new supply, equivalent to 475% of the five-year historic average, is planned from 2022 to 2024. However, this supply is prime and high quality, commanding higher than average rents, which should cause average rents to flatten, supported by increasing demand.
As a wide range of vacancies, including new office buildings, have become available, it is a favourable time for tenants to find the right office space options for their needs. This also provides opportunities for the new space to adapt to post-Covid workplace strategies. We recommend landlords and building owners keep a close watch as the new supply comes online from 2022, to perfectly time their flexibility in negotiations, despite rents remaining high and at their highest level in the past decade.
Supply: Concerns over changes in the supply-demand balance due to increased new supply
New supply in 2022 is expected to be the largest over the past five years; in 2024, several large buildings are to be completed in the city centre and the anticipated supply will be even higher than 2022. We expect pre-leasing activities in these developments will increase in the upcoming quarters.
Vacancy & Rent Trends: Rents flattening at highest level in the past decade, but vacancy rates continue to rise
For the past two years, office rents in Osaka have maintained an upward trend, but the pace of increase has slowed since the second half of 2021. We expect changes in the supply-demand balance as new supply increases in the next three years, with average rents remaining flat or decline slightly.
Submarkets: Vacancy rates have been rising mildly, the impact of large new supply should be closely monitored
Vacancy rates have been rising mildly since 2020 in all major submarkets, maintaining under the 5% level, except some areas that have been heavily affected by new supply. Despite the rising vacancy, average rents are at highest level in the past decade.
*1 The Grade A office buildings surveyed were selected on our own criteria from office buildings for lease with a typical floor plate of approximately 300 tsubo or more.