- Investment-grade offices have seen minor changes in rents, rising half-year-on-half-year (HoH) in Fukuoka and marginally contracting HoH in Osaka and Nagoya. Meanwhile, vacancy loosened in Osaka and Fukuoka, and tightened in Nagoya.
- All-grade office rental changes have been moderate across submarkets. Rents in Sapporo, Fukuoka, and Nagoya increased HoH, while Osaka and Sendai contracted marginally HoH.
- Cap rates for Grade A offices remained unchanged, and are relatively tight across all regional submarkets.
- Investment volumes in 2022 exceeded those of 2021 by 13%, while transactions have been slow so far in 2023. A few big ticket transactions took place over the past half-year.
- New supply has been modest in Osaka and Nagoya in 2023, while Fukuoka has welcomed a significant amount of new office space.
- Large levels of supply are expected in Osaka and Fukuoka over the next few years, which might cause some fluctuations.
Despite the current market stability, substantial new office supply may cause disruption
Stability has been a feature of regional office markets over the past half-year, especially given Japan’s positive post-pandemic economic performance. New supply has been fairly limited overall in 2023, creating some breathing room to absorb existing vacant space. That said, many expensive or non-ideally located properties continue to underperform, while the large new supply slated over the coming years might impact the current equilibrium.
Savills Research & Consultancy