Outlook 2023 Japan
KEY MESSAGES TOKYO
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.
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