Rents contracted over the year for the first time in 2020, with the C5W appearing to feel the effects of remote work more than most.

• Rents in the Tokyo 23 wards (23W) posted their first annual decline in Q4/2020, and now stand at JPY3,999 per sq m – a decrease of 1.9% quarter-on-quarter (QoQ), and 1.1% lower year-on-year (YoY).
• Average mid-market rents in the central five wards (C5W) also weakened, falling 1.2% QoQ to JPY4,780 per sq m. Within the C5W, Shibuya saw the sharpest QoQ decline of 2.8%.
• The C5W saw its premium over the 23W slightly narrow but remain at around 19%. In contrast, the other submarkets saw their standings improve relative to the 23W average.
• At the ward level, Nakano showed the strongest growth this quarter, posting a 2.2% QoQ gain and more than recovering from the dip seen at the start of Q1/2020. Meguro took the top spot on an annual basis, displaying robust growth of 7.3% YoY.
• In the C5W, average rents for units in the 15-30 sq m size band – which represent the majority of listings – have decreased 2.5% QoQ, while larger units saw rents remains fairly flat.
• The average occupancy rate for the 23W dipped slightly by 0.4 percentage points (ppts) QoQ to 96.0% as of Q4/2020. Occupancy in the C5W fell 0.3ppts QoQ to 94.4% - the lowest since 2012.
• Work-from-home arrangements are likely to stay for the time being and become the norm for some people as well as an occasional option for more.