The quarterly rental adjustment has continued, but is still at manageable levels for the time being.
- In the central five wards (C5W), cracks have deepened in the office market with all submarkets seeing rents contract and increased vacancy rates for a second consecutive quarter. However, the declines were modest outside Shibuya.
- Average Grade A office market rents in the C5W fell 2.6% quarter-on-quarter (QoQ) and 2.4% year-on-year (YoY) and now stand at JPY36,460 per tsubo1 per month.
- The average Grade A office vacancy rate in the C5W increased slightly to 1.0% in Q4/2020.
- Average large-scale Grade B office rents declined to JPY27,866 per tsubo per month – a contraction of 2.3% QoQ and 1.1% YoY.
- The average vacancy rate in the Grade B market lies at 1.6% following a loosening of 0.6 percentage points (ppts) QoQ and 1.5ppts YoY.
- As many companies adopt remote work policies, shared office providers are moving to rapidly expand offices outside the C5W to accommodate the increase in demand. These remote offices are likely to serve as a complement to central offices and as one solution for issues surrounding working from home.
- Remote work policies may see some companies downsizing their central offices. However, this may also create an opening in the traditionally air-tight prime office market for companies that had been interested.