Tokyo office market faces supply shortage and rising rents

The Tokyo office market is experiencing significant tightening due to high demand and limited new supply. According to reports from JLL and CBRE, vacancy rates in central Tokyo have reached exceptionally low levels, with Grade A office vacancy sitting as low as 0.7% to 0.8% in certain submarkets.

This scarcity is driven by a strong return to office trends and high corporate performance in sectors such as manufacturing, professional services, and scientific research. However, the market is seeing a growing polarization: while premium Grade A spaces in areas like Otemachi, Marunouchi, and Akasaka/Roppongi face intense competition and rising rents, older or lower-grade buildings struggle to attract tenants.

Rental prices are climbing sharply. Average monthly gross rents have seen double-digit year-on-year increases, with some Grade A rents reaching approximately JPY 43,250 per tsubo. The lack of new supply is being exacerbated by soaring construction costs, which have delayed several development projects. Consequently, many companies are facing a shortage of available space for expansion, and the difficulty of securing prime locations is becoming a critical factor in recruitment and talent retention strategies.