But new supply pushes up office vacancies in multiple Japanese cities
According to global property consultant CBRE, Tokyo's office vacancy rate is rising on the back of new supply.
All-grade office vacancy rates rose to 4.9% in Q3 2022, an increase of 0.6 points from the previous quarter, primarily due to vacancies in newly-completed buildings.
With corporations becoming increasingly cost-conscious, vacancies in some of the existing buildings, which offer better value for money with respect to location or grade, are being taken up faster than those in newer properties. All-Grade rents slid by 0.4% from the previous quarter, with rents continuing to be lowered in larger properties which are set to face stiff competition from the significant new supply slated for 2023.
CBRE also reports Osaka's Grade and Grade B vacancy rates fell for the first time in two and a half years. All-Grade vacancy rates fell by 0.3 points to 3.5% in Q3 2022 as relocations to larger premises and in-house expansions filled many vacancies, particularly in Grade B buildings. All-Grade rents declined by 0.1% from the previous quarter, with buildings demanding rates more than JPY 20,000 per tsubo attracting little interest across all grades. This prompted landlords to lower rents, particularly for higher-end properties.
In addition, Nagoya office rents continue to be reduced in higher end buildings. All-grade office vacancy rates for the quarter rose by 0.4 points to 5.8%, largely on the back of office consolidations and downsizings. Demand remained robust for smaller properties commanding asking rents at or around the market average of approximately JPY 15,000 per tsubo. All-Grade rents fell by 0.1% from the previous quarter, with asking rents lowered in several buildings, particularly those with vacancies remaining in higher rent brackets.