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- Investment-grade offices recorded strong rental growth over the past half year across Osaka, Nagoya, and Fukuoka. Vacancy decreased in a majority of the markets, supported by sound demand from tenants.
- The all-grade office market remains strong in 1H/2025, with rental growth experienced in all regional markets, and moderate vacancy tightening, excluding Sapporo.
- Grade A office cap rates remained mostly flat across the regional office markets, with the exception of Osaka, which tightened slightly. Overall, cap rates remain tight across all submarkets.
- Overall investment volumes and office investment volumes as of Q1/2025 are lower than those of the same period in 2024 by around 40%.
- Osaka, Nagoya, and Fukuoka are expected to see limited new supply beyond 2026, potentially creating room for future absorption.
- Higher office attendance and ongoing competition for talent continue to drive demand for modern office buildings in prime locations.
- Elevated construction costs and labour shortages have delayed and altered new office projects, while also making developers more cautious, consequently creating space for existing supply to be absorbed.
Robust demand supports strong market momentum
Rental growth and tightening vacancies continue across regional markets. The significant new office supply introduced in 2024 has seen strong demand, driven by expanding businesses and those seeking modern, well-equipped spaces to attract and retain talent amid the ongoing competition for staff.
Savills Research & Consultancy