Outlook 2023 Japan

KEY MESSAGES TOKYO

SUPPLY

DEMAND

RENTS

 The redevelopment of the Azabudai/Toranomon area, KEY OUTLOOK

 Lump-up supply is forecast to enter the Tokyo C5W market every two years, tracking at above 5% of total stock or 240,000 tsubo (793,390 sqm) until 2027.

 Rebound from COVID lows remains slow. Net absorption is expected to follow the market cycle of incoming supply after recording negative absorption in 2021. ​  While the incoming supply of high-quality buildings are over 30% pre-committed for 2023, the overall vacancy is projected to increase from 0.6% in 2019 toward the mid 5% over the next three years. ​ ​

 Rents are forecast to decline by 13% until 2025, before stabilizing below the forecast inflation rate of 0.7%.​  Landlord pricing power is expected to remain strong in a small number of the amenity rich buildings. However, the overall market is expected to remain tenant favourable during our forecast horizon​ .

together with the ongoing flight to quality trend, will reinforce its ‘emerging destination precinct’ status within C5W, and bring together high-quality residences with amenities and improved public transport infrastructure. ​