Amid the continued deterioration of the office market, there is hope that the accelerated vaccine rollout could be the catalyst for post-pandemic recovery.
- Whilst the lingering changes to workstyles introduced by COVID-19 are slowly being understood, it continues to weigh on office rents in the central five wards (C5W).
- Average Grade A office market rents in the C5W fell 1.7% quarter-on-quarter (QoQ) and 7.1% year-on-year (YoY), and now stand at JPY35,157 per tsubo per month.
- The average Grade A office vacancy rate in the C5W increased by 0.6 percentage points (ppts) QoQ to 1.8% in Q2/2021.
- Average large-scale Grade B office rents declined to JPY26,765 per tsubo per month – a contraction of 1.9% QoQ and 6.6% YoY.
- The average vacancy rate in the Grade B market loosened by 0.5ppts QoQ and 2.0ppts YoY to 2.7%.
- Although there are mounting concerns over the emergence of secondary vacancy from 2020, encouragingly, most new supply expected this year has been filled or pre-leased. With 2022 supply expected to be limited, the market should have time to recuperate before the large influx the year after.
- Despite the continued stability of prime real estate in central locations, rental corrections observed in poorly located and older offices have weakened the overall office market.