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Tokyo office market Q4 2021 review and outlook

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Office Report Tokyo Q3 2021 1536 1040

Rents still dropping, recovering demand and low supply keep vacancy in check


In Q4 2021, net absorption for Grade A office buildings in Tokyo returned to positive territory. The vacancy rate, which had been steadily rising during the pandemic, fell for the first time in almost two years as some large vacant units were absorbed.
To implement their new return-to-office strategies, tenants took advantage of vacancies in the market and falling rents. We recommend tenants take advantage of the current market to lock in lower rents in prime buildings. For landlords and building owners, tenant demand rebounded while new supply remained limited, creating an opportunity to fill existing vacancies. However, a reasonable discount on rents or longer rent-free period may be required to fill vacancies quickly.

Limited supply and recovering demand to lead to more balanced market conditions in 2022
Over the next 12 months, new supply of Grade A offices is scheduled to be lower than the annual average of recent years. In 2022, we expect to see improved balance in market conditions as demand recovers while supply remains limited.

Vacancy rates fell as demand recovered and rents remained on a downward trend
Since 2020, vacancy rates have showed consistent rise; however, the recent recovery in demand has led vacancy rates to plateau. While demand is recovering, the low level of new supply in 2022 could lead to a further small drop in vacancies by the end of 2022.
With plenty of vacancies remaining in the market and an imbalance between supply and demand, we expect rents to remain flat or continue to fall slowly.

Vacancies are peaking in most submarkets, while average rents diverge between submarkets
Rising vacancies plateaued in all areas. In areas where there were large vacancies, the average rent fell as many vacant units were filled at discounted rental rates. In some areas where demand is still strong, rents showed a steady recovery.

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Tokyo office market Q4 2021 review and outlook

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Kohei Kawai

Director & Head



As Director and Head of Research, Kohei is responsible for leading the research team in Japan with his strong capabilities in the field while moving into a more client-focused role, working closely with our existing client base and internal stakeholders across multiple functions. Reporting into the Managing Director in Japan, Kohei is leading and growing the local research capability with clear and ambitious targets for our clients, producing strategic, rigorous and actionable research that integrates our services across the region.
With 17 years of experience in the real estate industry, Kohei was responsible for analysing real estate market data for internal and external dissemination at XYMAX Real Estate Institute. His rigorous, strategic analysis contributed to developing business strategy plans and making management decisions, leading a team to produce data analyses for various businesses in the commercial real estate sector. 

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