Fundamentals for the Tokyo market remain sound with continued positive net-migration.

• Average rents in the Tokyo 23 wards (23W) increased slightly by 0.1% quarter-on-quarter (QoQ) to JPY4,039 per sq m, despite a 0.3% year-on-year (YoY) decrease.
• Rents in the central five wards (C5W) witnessed a moderate uptick, increasing 1.6% QoQ to JPY4,877 per sq m, and a yearly increase of 0.4%.
• The C5W rental premium over the 23W average is 19.6%, and has been higher than pre-pandemic levels since 2022.
• Chuo saw the largest quarterly rental increment of 3.7% QoQ, while Shinjuku saw the largest rental correction of 1.9% QoQ. Overall, the market appears to be stable.
• The smallest 15-30 sq m size band saw the largest rental increment at 1.6% over the quarter, although the 45-60 sq m size band maintains a notable premium.
• Average occupancy rates in the 23W increased by 0.4 percentage points (ppts) QoQ to 97.0%, while the C5W increased by 0.3ppts QoQ to 96.6%.
• Over the past decade, there has been a notable shift in preferences towards renting over buying condominiums, stemming primarily from rising condominium prices, changing mindsets, as well as the greater presence of institutional investors.