Prime offices have maintained a strong performance, while poorly located offices continue to suffer.

• While rental corrections and vacancy increments have persisted in the central five wards (C5W), they remain gentle.
• Average Grade A office market rents in the C5W fell 1.4% quarter-on-quarter (QoQ) and 6.7% year-on-year (YoY), and now stand at JPY32,809 per tsubo per month.
• The average Grade A office vacancy rate in the C5W increased 0.3 percentage points (ppts) QoQ and 1.2ppts YoY to 3.0% in Q2/2022.
• Average large-scale Grade B office rents contracted 2.1% QoQ and 8.0% YoY to JPY24,627 per tsubo per month.
• Vacancy rates in the Grade B market increased 0.5ppts over the quarter and 1.4ppts annually to 4.1%.
• Performance in Chuo can be dichotomised into the major inland submarkets and the Bay Area, with the latter suffering disproportionately due to its poor accessibility.
• As the pandemic reaches an endemic state, companies will better understand the amount of office space required for their needs and gradually move toward it.