According to CBRE's newly released 2018 Japan Real Estate Market Outlook, due to a new supply of Class A office space coming on the market, rental rates in Tokyo will see a correction in 2018.
CBRE reports office rents are set to fall for Tokyo Grade A buildings, but will continue to rise in regional cities. New supply in Tokyo will average 233,000 tsubo in 2018 and 2019, an increase of almost 30% on the 10-year annual average.
The vacancy rate is thus expected to rise to 4.8% at the end of 2019, 2.7 points higher than at the end of 2017. As a result, rents are likely to decline over the course of 2018, and are forecast to fall by around 8% by the end of 2019.
Meanwhile, future supply will remain limited in regional cities, where supply-demand conditions are already tight. With strong occupier demand also expected to continue, rise in rents is expected to continue in these regional cities.