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- Investment-grade offices continue to record strong rental growth over the past half year in 2H/2025. Meanwhile, vacancy continues to tighten, supported by steady tenant demand.
- The all-grade office market continues its momentum with rental growth and tightening vacancies in most regional office markets excluding Sendai.
- Grade A office cap rates continue to be flat across regional office markets, except for Osaka and Sapporo which tightened slightly.
- Limited new supply is expected in Osaka, Nagoya, and Fukuoka beyond 2026 due to labour shortages, rising land and construction costs, which should provide a silver lining for further supply absorption and rental growth.
- Although overall investment volumes as of Q3/2025 are roughly 11% lower than the same period in 2024, office investment volumes are 7% higher.
- The flight-to-quality trend is becoming increasingly pronounced, with new office buildings offering premium amenities enjoying strong rental growth. In contrast, some older assets, even those located near main train stations, are experiencing weaker demand, leading to rental discounts.
- Demand for modern office space continues to be driven by competition for talent and the growing trend of incorporating flexible workspace.
Positive momentum shows no signs of slowing
Regional markets continue to maintain positive momentum in 2H/2025. Well-located new buildings with modern amenities remain highly sought after, recording steady rental growth despite having limited vacancies. Meanwhile, labour shortages, rising land and construction costs continue to weigh on development activity, causing delays or cancellations that could further tighten the strong-demand market.
Savills Research & Consultancy