- With the exception of Fukuoka, investment-grade offices in all regions have seen mild corrections. All markets have seen vacancy increments, with Nagoya seeing the largest increase.
- All-grade office rents have seen divergence between markets, with some experiencing growth and others observing mild corrections.
- Cap rates for Grade A offices have tightened across markets again, demonstrating some bullish sentiment in the sector.
- Investment volumes in 2021 were almost the same as those in 2020 and 2019.
- Many regional cities are expecting notable supply in the coming years, which could be a challenge for some, but well received in others.
- Recovery will likely be dependent on specific properties, rather than performance at the submarket level.
Recovery underway with challenges ahead
The pandemic has transitioned into an endemic state, which has created a more optimistic environment for office recovery. At the same time, there are challenges ahead including the large supply of new offices in the pipeline. While a majority of offices appear to be doing well, a handful with bullish rents have high levels of vacancy. As such, recovery will need to be analysed at the property level, and not the submarket level.
Savills Research & Consultancy