Improvements continue in the Tokyo office market as appetite for office space remains firm.

• Office rents experienced sustained rental growth among both Grade A and Grade B properties. Grade A office vacancy was largely stable, although some weaknesses in certain submarkets were observed over the quarter.
• Average Grade A office rents in the C5W increased by 0.7% quarter-on-quarter (QoQ) and 2.5% year-on-year (YoY) to JPY33,235 per tsubo per month.
• The average Grade A office vacancy rate in the C5W loosened by 0.2 percentage points (ppts) QoQ, but tightened by 0.3ppts YoY to 3.1%.
• Average large-scale Grade B office rents improved by 0.6% QoQ and 3.0% YoY to JPY25,154 per tsubo per month.
• Vacancy rates in the Grade B market loosened marginally by 0.3ppts QoQ to 2.9%, but tightened on an annual basis by 1.1ppts.
• The limited office supply in 2024 has provided stability for the meantime. While the large office supply forecast in 2025 may lead to some volatility, many major incoming developments have received firm pre-leasing interest.
• Elevated construction costs will continue to force delays and redesigns to development projects. However, delays should also create more breathing room for existing properties to reduce vacancies.