Japan - July 2024

S P OT L I G H T
Savills Research

Regional JapaneseOﬃce Markets

Regional Japanese Oﬃce Markets

Positive trajectory overall, though temporary
weakness may be triggered by large supply
Summary• Investment-grade offi ces haveseen moderate improvements
in rents, rising half-year-on-halfyear (HoH) in Osaka, Nagoya,
and Fukuoka. Vacancy varied
slightly, tightening in Nagoya
and Fukuoka, while loosening
marginally in Osaka.
• All-grade offi ce rental
changes remained on a
positive trajectory over the
past half-year, while vacancy
remained stable, with a numberof instances of tightening
observed.

OVERVIEW
Many Japanese companies have enjoyedrecord proﬁts in 2023 and 2024, and businesssentiment is notably positive. Top global
players in niche markets and services focusing
on inbound businesses seem to be performingstrongly. Indeed, there is a meaningfulconnection between corporate performanceand oﬃce rental growth, which should be
supportive for regional oﬃce markets in Japan.
Many ﬁ rms are reassessing their oﬃce
needs and carrying out long overdue
renovations and relocations. Moreover, alarge proportion of ﬁ rms across Japan appear
to be gradually phasing out ﬂexible work

GRAPH 1: Investment-grade Office Performance, 1H/2024
2023 Rent

50,000

0.3%

1.7%

1.9%

-0.5%

0.9%

0.6%

10%

RENT HOH

40,000

0.8%

2.3%

6.5%

6.1%

30,000

6%
5.0%

5.7%

20,0004%
3.0%

10,000

8%

4.0%

3.9%

3.0%

2%

0

0%
Osaka

NagoyaFukuoka

Source Savills Research & Consultancy*Tokyo data represents Grade A offi ce performance in the C5W.

GRAPH 2: All-grade Office Performance, 1H/2024
2023 Rent

2024 Rent

2023 Vacancy

2024 Vacancy

35,00014%
RENT YOY

30,000

-0.2%

1.3%

2.2%

1.1%

1.2%

5.3%

12%

0.9%

2.8%

10%

JPY / TSUBO / MONTH

RENT HOH

25,000

1.0%

0.6%

0.8%

1.1%

20,000

8%
6.7%

6.4%
15,000

5.7%

5.9%

5.4%

5.4%

6%

5.1%
5.5%

5.4%

4.8%

10,000VACANCY• Large amounts of new supply
will be added to the Osaka andFukuoka markets in 2024 and2025, with some observers
concerned about potential
ﬂ uctuations. That said, strong
business sentiment has also
contributed to sound preleasing activity.

2024 Vacancy
12%

Tokyo

• 2024 will be a major year for
new supply, with several large,
mixed-use developments slated
for completion, notably inOsaka, Fukuoka, and Sapporo.

2023 Vacancy
RENT YOY

JPY / TSUBO / MONTH• Overall investment volumes
in 2023 lag those of the same
period in 2022 by nearly 10%,
while the office market saw agreater decline in transaction
volumes by 35% over the year.

2024 Rent

60,000VACANCY• Grade A office cap rates
tightened marginally in Nagoya,
Sendai, and Sapporo in
1H/2024, and were unchanged
elsewhere. Overall, cap rates
remain relatively tight across all
regional submarkets.

arrangements, and are therefore focused onproviding quality and ﬂexible workspacesthat support communication and improve
wellbeing in order to encourage workers backto the oﬃce, especially in the current tightlabour market. Hence, modern, mixed-use
oﬃce developments that can support such newworkstyles are enjoying signiﬁcant attention,
despite slightly more premium rental levels.
Properties with strong ESG certiﬁcations
appear to be especially attractive.
Overall, 2024 will be another busy year foroﬃce completions across many regional cities
in Japan. Osaka, Nagoya, and Fukuoka will all
welcome elevated volumes of new supply over

3.0%

5,000

2.3%

0

4%

2%

0%
Tokyo

Osaka

NagoyaFukuoka

Sendai

SapporoSource Miki Shoji, Savills Research & Consultancy*Market data as of March 2023 and March 2024.

savills.co.jp/insight-and-opinion/2

Regional Japanese Oﬃce Markets

the year. Considering that some premium
new additions over the past year had initiallystruggled to gain traction, observers may havesome concerns regarding temporal instability
in respective markets over the year.
This is especially the case in Osaka,
which will welcome over 90,000 tsubo of
NRA in 2024, the most notable addition
being GRAND GREEN OSAKA, which will
fundamentally transform the Osaka station
area. Elsewhere, several large-scale mixeduse oﬃce developments as part of the Tenjin
Big Bang scheme look to herald major changes
to the Fukuoka oﬃce market, while Sapporo
will welcome large amounts of new oﬃce
space in anticipation of the extension of the
Hokkaido Shinkansen to Sapporo in the early2030s. That said, pre-leasing has been soundamong many incoming oﬃce properties, due
to the high demand for modern oﬃce space,
and there is only some concern.

Regional office markets continue
to make improvements, largely due
to heightened business sentiment,
greater levels of office participation,and long overdue office relocations.
Though large amounts of supply arein the pipeline for many regional
markets, sound demand from tenants
should ensure stable absorption
and only temporal ﬂuctuations in
respective markets.

GRAPH 3: Expected Cap Rates for Grade A Offices, 2010 to 1H/2024
Osaka

NagoyaFukuoka

SapporoSendaiMarunouchi

8.0%

EXPECTED CAP RATE

7.0%
6.0%
5.0%
4.0%
3.0%
2.0%

1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H

1.0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
24
Source Japan Real Estate Institute, Savills Research & Consultancy

GRAPH 4: Expected Cap Rate Spreads (vs Marunouchi), 2010 to 1H/2024
Osaka

NagoyaFukuoka

SapporoSendai

2.5%

2.0%

1.5%

1.0%

0.5%

0.0%
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H
2H
1H

CAP RATE SPREAD VS MARUNOUCHI

3.0%

2024
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 24
Source Japan Real Estate Institute, Savills Research & Consultancy

3

Regional investment-grade oﬃce markets
have enjoyed moderate improvements overthe past half-year. Indeed, Osaka, Nagoya,
and Fukuoka all recorded rental growthof 2.3% HoH, 0.9% HoH, and 0.6% HoH,
respectively. Meanwhile, investment-grade
vacancy in Nagoya tightened considerably
by 2.2ppts HoH and by 1.2ppts HoH in
Fukuoka, while Osaka vacancy loosened
marginally by 0.2ppts HoH. With a handfulof signiﬁcant new developments completed
in 2024, some temporary weakness is to be
expected, though further improvements inbusiness sentiment and growing rates ofoﬃce participation should enable further
tightening of vacancy rates and sustained
rental growth moving forward.
Similarly, the situation has been positive
across all-grade oﬃce markets over the
past half-year. Moderate rental growth wasobserved among all regional markets, withthe largest growth observed in Sapporo at
2.8% HoH. Meanwhile, all-grade vacancy
diﬀered across submarkets over the past
half-year, tightening slightly in Fukuoka,
remaining ﬂat in Nagoya, while some minor
weaknesses were observed elsewhere.
That said, many instances of loosening
were triggered by large new additions in
respective submarkets, which should be
gradually absorbed over the coming yearwith the strong business sentiment.
REGIONAL INVESTMENT
According to the bi-annual investor survey
conducted by the Japan Real Estate Institutein April 2024, expected cap rates in mostregional markets remained either unchanged
or on a downward trajectory. In particular,

Regional Japanese Oﬃce Markets

GRAPH 5: Investment Volumes by Area for All Asset Types, 2007 to Q1/2024 (YTD)
Osaka
Sendai
Other

100%

NagoyaSapporoTotal Investment (RHS)
8.0

90%

7.0

80%
6.0
70%
60%

5.0

50%

4.0

40%

3.0

30%

JPY (TRILLIONS)PROPORTION OF INVESTMENT (%)

Tokyo
Fukuoka
Yokohama

2.0
20%
10%

1.0

0%

0.0

Source MSCI Real Capital Analytics, Savills Research & Consultancy*Transactions where speciﬁ c locations have not been identiﬁ ed are classiﬁ ed as other.

expected cap rates tightened in Nagoya,
Sapporo, and Sendai. Prices remain elevatedacross most real estate sectors in Japan,
and this compression in expected cap rates
is a demonstration of renewed interest inJapanese real estate among investors.
According to transaction data from
MSCI, total investment nationwide wasalmost 10% lower in 2023 compared to 2022.
That said, transactions in the oﬃce sector
have experienced a decline of around 35%
over the same period. As of Q1/2024, thevolume of oﬃce transactions appears to
be moderate, though the 2024 ﬁ gures are
preliminary and are expected to increase as
more transactions are conﬁ rmed.
With business sentiment improving
in Japan and the demand for oﬃce spaceamong tenants appearing to pick up,
renewed interest in the oﬃce sector has led
to a number of noteworthy transactions

savills.co.jp/insight-and-opinion/

over the past half-year in Japan’s regional
markets. BentallGreenOak acquired theoﬃce portion of HOMMACHI GARDEN
CITY in Osaka from Sekisui House REIT for
JPY44.5 billion, which was the largest suchtransaction over the past half-year. This may
be a harbinger of a return in the appetite foroﬃce properties among overseas investors.
Elsewhere, Orix JREIT decided to acquire
Sun Mullion Tower in Osaka for JPY19.0
billion, with Blackstone rumoured to be theseller, while an undisclosed buyer acquired
the Kawasaki Toshiba Building in Kanagawa
from United Urban REIT for the same price.
That said, cross-border investment
activity for regional oﬃce assets hasremained slightly weak in the past half-year.
Nevertheless, the oﬃce leasing market
has bottomed out, and brighter corporate
growth prospects, greater levels of oﬃce
attendance, and the notable yield spread4should attract more overseas capital to thesector moving forward.
OUTLOOK
Modest rental growth and general
improvements in vacancy have been
observed across most regional oﬃce markets
over the past half-year. Indeed, corporate
performance has been encouraging, andmany companies are taking the opportunity
to carry out overdue oﬃce relocations
and layout changes. Moreover, companies
nationwide appear to continue phasing out
ﬂexible work arrangements. The labour
shortage is also increasingly incentivising
companies to provide oﬃce layouts withsuperior amenities that support wellbeing. As
such, the strong appetite among tenants formodern oﬃce space looks to reinforce thispositive situation moving forward.
2024 will see large new oﬃce supply
introduced to many regional markets,and temporal ﬂuctuations are a distinct
possibility. That said, pre-leasing appears
to have proceeded uneventfully among
many incoming developments, whiledevelopers are providing some incentives.
Indeed, premium new oﬃce space should
be welcomed as a sign of conﬁdence in thegrowth possibilities of respective regional
markets. Though secondary vacancies andbifurcation may be observed in areas withweakness, the sound overall appetite foroﬃce space should ensure the stable andgradual absorption of existing vacancies.
We anticipate that this stable situation
should continue throughout 2024.
Temporary disruptions are likely to takeplace due to the completion of large amountsof new supply, but this should not detractfrom a longer-term growth trajectory,
supported by strong business sentiment anddemand for long overdue oﬃce relocations.

Regional Japanese Oﬃce Markets

GRAPH 6: New NRA Office Supply in Osaka City, 2006 to 2026F
100,000
90,00080,00070,000TSUBO

60,00050,00040,00030,00020,00010,0000

Source Sanko Estate, Savills Research & Consultancy

GRAPH 7: Vacancy Rate in Osaka City by Area, 2011 to Q1/2024
Average
Yodoyabashi-Honmachi
Shin-Osaka

Umeda
Semba

Minami-Mori
Shinsaibashi-Namba

25%

VACANCY

20%

15%

10%

5%

0%
2011

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source Miki Shoji, Savills Research & Consultancy

GRAPH 8: Average Rent in Osaka City by Area, 2011 to Q1/2024
Average
Yodoyabashi-Honmachi
Shin-Osaka
17,000

Umeda
Semba

Minami-Mori
Shinsaibashi-Namba

JPY / TSUBO / MONTH

16,00015,00014,00013,000OSAKA CITY
Net Rentable Area (NRA)
2023 was a relatively quiet year in terms of
new oﬃce supply in Osaka. As corporate
performance and leasing activity continue
to improve, the market is witnessing further
stabilisation.
That said, observers may have someconcerns, due to the new oﬃce supply in
2024 of around 90,000 tsubo NRA. The
largest addition will be GRAND GREENOSAKA, delivering nearly 35,000 tsubo ofpremium NRA to the market. However, thedevelopment appears to have experienced
sound pre-leasing, with over half of theoﬃce space ﬁ lled already. The developer
seems to have provided signiﬁcant
incentives to a main tenant.
Furthermore, the addition of premium,mixed-use oﬃce developments should
invigorate the market, catering to evershifting demand from tenants who areseeking more diverse amenities, such as
exclusive dining and even sauna space.
Indeed, many companies are utilising thisperiod of recovery in the market to carry out
long overdue oﬃce relocations and layoutchanges. Overall, while the large uptick in
supply is likely to cause some temporal ripples,
the absorption of upcoming oﬃces looks toproceed rather smoothly with sound demand.
Vacancy
Investment-grade vacancy rates loosened
marginally by 0.2ppts HoH to 4.0% in
1H/2024. Though Osaka welcomed a few newoﬃce properties with large amounts of NRA,
they experienced strong leasing activity,
indicating ﬁrm tenant demand for new oﬃce
spaces. Indeed, vacancy tightened among
many submarkets, with the Shin-Osaka
submarket tightening by a notable 3.5ppts
HoH in particular.
Meanwhile, all-grade oﬃce vacancy
rates loosened slightly by 0.3ppts HoH to
4.8%. The Shin-Osaka submarket saw thelargest tightening of 1.9ppts HoH, whilevacancies in the Shinsaibashi-Namba
submarket tightened by 1.1ppts HoH to thelowest rate at 2.8%. Similarly, Minami-Mori
saw a marginal decline in vacancy, thoughother submarkets experienced moderateloosening.

12,00011,00010,0009,000
8,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source Miki Shoji, Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

5

Rent
Rents among investment-grade oﬃces
strengthened by 2.3% HoH to JPY22,300
per tsubo in 1H/2024. A few premium
additions contributed to the increase in theoverall rental level, with top rents in Osaka
increasing to JPY42,000 per tsubo. That said,

Regional Japanese Oﬃce Markets

TABLE 1: Osaka Investment-grade Offices

1H/2024

HOH

YOY

Rent

22,3002.3%

1.7%

Vacancy

4.0%0.2ppts-1.0ppts

Top Rent

42,000+4,000+4,000Source Savills Research & Consultancy

several landlords appear to have carried out rental
revisions in order to remain competitive given theinﬂux of modern oﬃce space.
All-grade rents increased by 0.6% HoH to
JPY12,000 per tsubo. Umeda and YodoyabashiHonmachi submarkets experienced the largest
improvements of 0.8% HoH. Many othersubmarkets also experienced rental growth,particularly due to new completions that have
above-average rents.

decreased by 1.1% HoH to JPY23,300 per tsubo in
1H/2024. Meanwhile, investment-grade vacancy
tightened by a marginal 0.1ppts HoH to 3.7%.
In 2024, the market welcomed Midosuji
Daibiru, which arrived fully occupied, as well as the
Urbannet Midosuji Building, which is largely full.
In addition, Osaka Dojimahama Tower appears tohave come to the market almost fully leased. Indeed,
their strong leasing performance demonstrates thestrength of tenant demand for oﬃces.

Umeda
Rents for investment-grade oﬃces in the Umeda
submarket increased notably by 3.6% HoH to
JPY25,700 per tsubo, largely due to the additionof JP Tower Osaka. Meanwhile, investment-grade
vacancy loosened marginally by 0.6ppts HoH to
4.7%. Demand for oﬃce space in the prime area of
Osaka appears to have remained ﬁrm overall.
That said, the strength of the Umeda submarket
may be tested in the second half of 2024, withthe completion of the enormous mixed-use,
multi-tower GRAND GREEN OSAKA as wellas INOGATE Osaka, both of which should
fundamentally transform the area, and are
rumoured to have high rents of around midto-high JPY30,000 per tsubo. GRAND GREENOSAKA appears to have already attracted several
major tenants, and is well over half pre-leased.

Shin-Osaka
Investment-grade rents for oﬃces in the ShinOsaka submarket decreased marginally by 0.4%
HoH to JPY18,700 per tsubo. Meanwhile, average
investment-grade vacancy rates improved notably
for a subsequent period, tightening by 3.5ppts HoH
to 2.4%.
The Shin-Osaka submarket recently welcomed
Prime Place Shin-Osaka, which introduced
over 3,000 tsubo of NRA. The development has
been largely leased out, and the overall vacancy
rate in the submarket has fallen, highlighting
the recovery of demand in the submarket.
Furthermore, there will be no completions
slated for the near term, which bodes well forthe submarket as it continues to make soundimprovements.

Yodoyabashi-Honmachi
On the other hand, rents for investment-gradeoﬃces in the Yodoyabashi-Honmachi submarket

Outlook
The limited supply introduced to the Osaka oﬃce
market in 2023 allowed some further breathing
room to absorb existing vacant space. That said,

6

ﬂuctuations are likely to occur. This year’s supply
will be the largest in over three decades in Osaka.
The Umeda submarket, where a majority ofthis new supply will be concentrated, may beof particular concern. That said, large mixeduse schemes such as GRAND GREEN OSAKA
will lead the large-scale improvements of theirrespective surrounding areas, providing modern
and diverse amenities to tenants, and generating
new demand in the process.
Looking ahead to 2025, the Osaka market will
welcome nearly 40,000 tsubo of NRA, with a large
proportion concentrated within close vicinity of
convenient Yodoyabashi station. The Yodoyabashi
East project appears to be almost half pre-leased,
marking an auspicious start.
All in all, most oﬃce submarkets in Osakacontinue to improve, with noticeable progress
made in the Shin-Osaka submarket in particular.
Indeed, recent strong corporate performance
should support oﬃce demand moving forward.
While temporal ﬂuctuations are likely over the
coming year, the longer-term outlook for the
Osaka oﬃce market appears to be brighter.

Regional Japanese Oﬃce Markets

GRAPH 9: New NRA Office Supply in Nagoya City, 2006 to 2026F
50,00045,00040,00035,000TSUBO

30,00025,00020,00015,00010,0005,000
0Source Sanko Estate, Savills Research & Consultancy

GRAPH 10: Vacancy Rate in Nagoya City by Area, 2011 to Q1/2024
Average

Meieki

FushimiSakae

Marunouchi

20%

VACANCY

15%

10%

5%

0%
2011

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source Miki Shoji, Savills Research & Consultancy

GRAPH 11: Average Rent in Nagoya City by Area, 2011 to Q1/2024
Average

Meieki

FushimiSakae

Marunouchi

16,000JPY / TSUBO / MONTH

15,00014,00013,00012,00011,000NAGOYA CITYNRA
The Nagoya oﬃce market has welcomed alarge volume of new oﬃce space in the pasthalf year, and a total of eight major new oﬃce
completions in 2024 will add over 15,000
tsubo of new NRA to the Nagoya market,
with a majority of this supply concentrated in
the ﬁrst half of 2024. Due to recent positive
corporate performance, especially growing
automobile exports, business conﬁdence
appears positive and the appetite formodern oﬃce space should hold strong, withdecreasing secondary vacancies even amongsome older properties.
Looking forward, 2025 appears to be aquiet year, and the only new developmentof moderate scale in the pipeline will be the
Nishikidori Kuwana-cho Building, which
will reportedly deliver an NRA of around
5,000 tsubo. The limited incoming supply
will provide some breathing room forfurther absorption and stabilisation before
a substantial inﬂux of over 25,000 tsubo of
NRA in 2026.
Vacancy
Investment-grade oﬃce vacancy in Nagoyatightened considerably by 2.2ppts HoH to
5.7% in 1H/2024. The Nagoya Shimizu Fukoku
Seimei Building and the 2nd NAGOYASANCO BUILDING, both completed in theﬁ rst half of 2024, received strong interest
from tenants, and appear to be largely
occupied after arriving to the market. In
particular, favourable market conditions
have spurred increased demand for modern
oﬃce space, and many companies appear
to be carrying out long overdue oﬃce
relocation and consolidation activity. With
new large oﬃces being eﬀectively ﬁ lled,
Hirokoji Cross Tower appears to have also
secured some tenants.
All-grade market vacancy remained ﬂatover the past half-year at 5.7% in 1H/2024.
Marunouchi’s vacancy loosened by 2.1ppts
HoH to 7.4%. Despite strong leasing activity
observed for the newly completed Nagoya
Shimizu Fukoku Seimei Building, its
substantial addition of 8,600 tsubo of NRA
temporarily contributed to the overall uptick
in vacancy in the submarket. On the other
hand, Meieki and Fushimi saw vacancies
tighten by 0.6ppts HoH and 0.2ppts HoH to
5.6% and 6.3%, respectively.

10,0009,000
8,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source Miki Shoji, Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

7

Rent
In 1H/2024, investment-grade oﬃce rents
increased by 0.9% HoH to JPY20,600 per
tsubo, translating to a yearly increment of
1.9%. This rental growth appears to haveRegional Japanese Oﬃce Markets

TABLE 2: Nagoya Investment-grade Offices

1H/2024

HOH

YOY

Rent

20,6000.9%

1.9%

Vacancy

5.7%-2.2ppts-0.8ppts

Top Rent

35,000+00Source Savills Research & Consultancy

been driven largely by newly completed oﬃce
developments, which command above-averagerents, as well as by the rental increment observed
among many oﬃce properties. Some newcompletions initially set lower rents, but strong
market demand has led to upward rental revisions
in the past half-year.
Meanwhile, all-grade rents strengthened
across all submarkets in 1H/2024, increasing by
0.8% HoH to JPY12,400 per tsubo. Marunouchi
saw the largest uptick of 1.4% HoH, driven by
the premium rents from some newly completeddevelopments. Similarly, rents in the mostexpensive submarket Meieki, climbed by 1.1% HoH
to JPY15,500 per tsubo. Elsewhere, Fushimi and
Sakae saw modest rental growth at 0.6% HoH and
0.1% HoH, respectively.
Meieki
Meieki’s investment-grade oﬃce rents dippedslightly by 0.1% HoH to JPY26,600 per tsubo.
Meanwhile, investment-grade vacancy tightened
moderately by 1.5ppts HoH to 5.0%.
Despite the notable oﬃce addition in thesubmarket, vacancy rates in Meieki havetightened steadily over the past half-year. The
increase in demand appears to have stemmed

from tenants expanding their oﬃce spaces
and companies relocating into the submarket.
Furthermore, ﬁ rm demand was observed in both
new completions and existing oﬃce buildings,
demonstrating the growing popularity for oﬃces
in this premier submarket.
Fushimi and Marunouchi
Investment-grade oﬃce rents in the Marunouchi
submarket increased by 3.0% HoH to JPY 16,700
per tsubo, while rents in Fushimi recorded an
uptick of 0.4% HoH to JPY18,500. That said,
investment-grade vacancy showed contrasting
results, with Fushimi tightening signiﬁcantly by
5.7ppts HoH to 6.0%, while Marunouchi loosened
moderately by 3.1ppts to 9.5%.
The Fushimi submarket will welcome 1,000
tsubo of NRA from the I-FOREST Nagoya
Fushimi Building (formerly named Iyo Bank
Nagoya Building) in mid-2024. Overall demandfor oﬃce spaces remains ﬁ rm in this submarket
and vacancy is likely to continue improving.
Outlook
Recovery has taken hold and gained pace in the
Nagoya oﬃce market, with new completions
seeing strong demand from tenants. As such,

8

Nagoya’s investment-grade rents increased
moderately, while investment-grade vacancy
tightened over that past half-year.
Demand for oﬃce space has been picking up as
corporate performance continues to improve inthe post-pandemic era, as seen from the recent
strong leasing activity. Indeed, companies appear
increasingly eager to expand oﬃce ﬂoor space,comprising a majority of new leasing agreements,and several large relocations have exceeded
1,000 tsubo. In addition, there will be only one
prominent addition in the Nagoya oﬃce market
in 2025, which should provide breathing roomfor further absorption of existing vacancies andsecondary vacancies.
Further down the line, the anticipated additionof two large-scale oﬃce projects in Sakae in
2026 will look to further enhance the image ofthe submarket. Indeed, the recently completed
Chunichi Building, which is reportedly nearly
fully leased, has infused the submarket with avibrant atmosphere and has demonstrated thestrong pent-up demand for high-quality buildings
with top-notch amenities. That said, the large
incoming supply may at the same time disrupt thesubmarket, at least temporarily.

Regional Japanese Oﬃce Markets

GRAPH 12: New NRA Office Supply in Fukuoka City, 2006 to 2026F
35,00030,000TSUBO

25,00020,00015,00010,0005,000

0Source Sanko Estate, Savills Research & Consultancy

GRAPH 13: Vacancy Rate in Fukuoka City by Area, 2011 to Q1/2024
Average
YakuinHakata Sta. Southeast

Akasaka
Gion

TenjinHakata Sta. West

20%

VACANCY

15%

10%

5%

0%
2011

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source Miki Shoji, Savills Research & Consultancy

GRAPH 14: Average Rent in Fukuoka City by Area, 2011 to Q1/2024
Average
YakuinHakata Sta. Southeast

Akasaka
Gion

TenjinHakata Sta. West

14,000JPY / TSUBO / MONTH

13,000FUKUOKA CITY
NRA
Nearly 25,000 tsubo of new oﬃce NRA
was completed in Fukuoka in 2023, asigniﬁcantly uptick compared to theprevious year. Overall, there has beena sense of optimism in Fukuoka in the
post-pandemic setting. The Hakata area
is performing particularly well, withstrong tenant demand as well as a seriesof demolitions contributing to notabletightening in the submarket.
New supply in 2024 is set to be similarly
large, at over 25,000 tsubo of NRA,
concentrated largely in Tenjin and Hakata
submarkets. The most notable new addition
will be the 14,000 tsubo ONE FUKUOKA
BLDG, which will be completed as partof the Tenjin Big Bang project. Despite
the likely temporary uptick in vacancy
upon its completion in the short term, thetransformative eﬀect of these projects should
generate new demand and strengthen the
Fukuoka oﬃce market overall moving forward.
Vacancy
Investment-grade vacancy in Fukuoka has
made notable progress, having tightenedover the past half-year by 1.2ppts to 3.9%.
A number of properties completed over the
past year have been largely ﬁlled, which is atestament to the sound demand for modern
oﬃce space in the city. Major incoming
developments, such as the ONE FUKUOKABLDG and the Hulic Fukuoka Building shouldbe the bell weather in the Tenjin submarket.
Meanwhile, the all-grade market saw
average vacancy rates fall by 0.4ppts HoH
to 5.4%. Most submarkets displayed somemoderate improvements over the past halfyear, while only the Hakata Station Southeast
submarket recorded a moderate loosening
in vacancy. In particular, all-grade vacancy
tightened in the Tenjin, Yakuin, and Hakata
Station West submarkets by 0.9ppts HoH,
0.6ppts HoH, and 0.5ppts HoH, respectively.
The situation appears to remain lukewarm
in the Akasaka submarket, with all-grade
vacancies elevated at 10.1%, the highest in
Fukuoka. Fukuoka Daimyo Garden City
appears to need some more time.

12,00011,00010,000

9,000

8,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source Miki Shoji, Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

9

Rent
In 1H/2024, investment-grade rents inFukuoka increased notably by 0.6% HoH
to JPY19,200 per tsubo. Rental growth wasobserved in both the Hakata and Tenjin
submarkets, largely due to the completionof a number of new properties with above
average rents, and with a handful of existing
properties with low levels of vacancy raising
rents moderately in the growing market.

Regional Japanese Oﬃce Markets

TABLE 3: Fukuoka Investment-grade Offices

1H/2024

HOH

YOY

Rent

19,200

0.6%

-0.5%

Vacancy

3.9%-1.2ppts-2.2ppts

Top Rent

30,00000Source Savills Research & Consultancy

Similarly, in the all-grade oﬃce market,
average rents increased moderately by 1.1% HoH
to JPY11,600 per tsubo, which continue to charta course into record territory. Looking ahead,new oﬃces in the pipeline are forecast to havepremium asking rents, which should continue topush average rents up further, while improving thequality of both available oﬃce stock as well as theoverall landscape of Fukuoka’s business districts.
HakataRents of investment-grade buildings in Hakata
increased by a moderate 1.3% HoH to JPY20,700
per tsubo. Investment-grade vacancy showedsimilar signs of improvement, tightening by
0.7ppts HoH to 1.0%. Indeed, vacancy is currently
extremely tight due to a combination of strong
demand, and a series of demolitions associatedwith the Hakata Connected project, leading to asense of scarcity of prime oﬃce space.
Though there are several redevelopment
projects underway in the submarket, newsupply in 2024 is moderate, with the 3,500 tsubo
Connect Square Hakata the only major arrival,
which appears to be largely full already. Overall,
the oﬃce market in Hakata is anticipated to
be stable over the coming year, and upcoming
redevelopment work should gradually improve thelandscape of the submarket.

TenjinThe situation appears positive in Tenjin.
Investment-grade rents improved by 0.9% HoH
to JPY21,300 per tsubo, while investment-grade
vacancy tightened further by 3.9ppts HoH to 7.8%.
The Tenjin market appears to have remained stable
over the past half-year and appears to be improving,with a handful of large tenant relocations.
A few major oﬃce developments are slated forcompletion in 2024, such as the ONE FUKUOKABLDG and the Hulic Fukuoka Building. Theremay be some concerns over the large demand for
expensive oﬃces. That said, the wider Tenjin Big
Bang improvement project will polish the imageof the submarket over the long-term.
Outlook
The Fukuoka oﬃce market experienced further
growth over the past half-year. Major business
districts in Fukuoka witnessed sound demand
for new oﬃce space, which contributed to some
reductions in vacancy, with some rental growth
also observed. Indeed, strong net migration
during the spring moving season in Fukuoka City,
positive business sentiment and the encouraging
uptake of new oﬃces indicate that the Fukuoka
market is faring well.
New oﬃce supply is anticipated to remain
elevated over the coming years, with several

10

large-scale developments slated for completion aspart of the Tenjin Big Bang and Hakata Connected
projects. Despite potential temporal ﬂuctuations,these developments are a sign of conﬁdence in thegrowth potential of the city. These developments
should increase the overall quality of oﬃce stockof respective surrounding areas.
Large new expensive oﬃce supply in Tenjinslated for completion this year has madesome observers worried. Indeed, there may be
insuﬃcient tenants who can aﬀord rents around
the JPY30,000 level, and this might change thedirection of the market.
Nevertheless, bright spots are plentiful for thewider Fukuoka economy, with TSMC’s US$20
billion investment into the development of two
chip-making facilities in Kumamoto likely to be
gamechangers for the wider economy of Kyushu,
and will likely stimulate many opportunities
in Fukuoka City. Overall, the prospects for the
Fukuoka oﬃce market appear positive, and major
redevelopment plans should fundamentallytransform the central submarkets and improvetheir appeal over the coming years.

Regional Japanese Oﬃce Markets

SENDAI CITY
Supply and Demand
In 2023, the Sendai market saw an inﬂux ofapproximately 15,000 tsubo of new oﬃce space,
the largest since 2011. In contrast, new supply in
2024 will be relatively limited, with a modest
addition of around 4,000 tsubo of NRA.
The completion of the Urbannet SendaiChuo Building and Woodrise Sendai in
November 2023 introduced an aggregate
9,000 tsubo of NRA to the market. Despite
experiencing lukewarm demand with highvacancy rates upon completion, they haveshown gradual signs of improvement since.
On the other hand, T-Plus Sendai and the

Sendai KS Building, completed in early 2024
have garnered a more optimistic outlook,eﬀectively drawing demand from tenant
relocations and expansions.
In addition, there are no forecasts for
signiﬁcant new oﬃce supply in the latter
half of 2024. The limited supply presents asilver lining, providing room for absorptionof the remaining vacant space from theprevious year. Looking forward, Sendai’s
Station Front area will welcome another
2,500 tsubo of NRA in 2025.
Vacancy
The all-grade vacancy rate in Sendai
increased by 1.3ppts HoH, reaching 6.7% in

GRAPH 15: Vacancy Rate in Sendai City by Area, 2011 to Q1/2024

Average

Station Front

1-banchoCity Hall

Station East

Outer Area

30%

25%

VACANCY

20%

15%

10%

5%

0%
2011

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source Miki Shoji, Savills Research & Consultancy

GRAPH 16: Average Rent in Sendai City by Area, 2011 to Q1/2024

Average

Station Front

1-banchoCity Hall

Station East

Outer Area

12,000JPY / TSUBO / MONTH

11,00010,000

9,000

8,000

7,000

6,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Source Miki Shoji, Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

11

Q1/2024. Sendai’s constituent submarkets
showed diverging trends over the past
half-year. The Outer Area, known for
its aﬀordability, witnessed a signiﬁcanttightening of 1.5ppts HoH to 7.0%, while City
Hall experienced a slight decrease of 0.1ppts
HoH to 5.6%.
Meanwhile, Station East, 1-bancho,
and Station Front submarkets loosenedby 3.0ppts, 2.1ppts and 0.6ppts HoH,
respectively. The uptick in vacancy can likely
be attributed in part to the completion ofnearly 15,000 tsubo of new oﬃce spaceover the past half year, as wells as tenants
downsizing their oﬃce footprints.
Rent
Average all-grade oﬃce rents saw a moderateincrease of 0.9% HoH to JPY9,350 per
tsubo in Sendai. A majority of submarkets
experienced rental increments, largely driven
by the moderate inﬂux of modern oﬃce
supply with above average rental levels.
The Station Front submarket experienced
the largest increase of 1.2% HoH to
JPY10,900 per tsubo due to the completionof the Urbannet Sendai-Chuo Building,which has a relatively high rental level. The
Station East, the submarket with the second
most expensive average rents also witnessedrental growth at 1.1% HoH to JPY10,500 per
tsubo. Indeed, the completion of the Sendai
KS Building made a notable contribution tothis increment.
On the other hand, the City Hall
submarket experienced a marginal rental
contraction of 0.2% HoH to JPY8,050 per
tsubo. Looking ahead, rents are expected tostabilise as no new supply is in the pipeline
for the remainder of 2024.
OutlookSendai has performed reasonably well in
2023, despite the completion of six majoroﬃce buildings bringing about a sizable
inﬂux of 15,000 tsubo of NRA. Averagevacancy loosened over the past half year,
especially in late 2023 due to the completionof the sizeable Urbannet Sendai-Chuo
Building. However, ﬁrm demand from ﬁrms
looking to expand their oﬃce footprints
has ensured that supply is gradually being
absorbed. Moreover, the inﬂux of modern
oﬃce properties has contributed to a steady
improvement in average rents.
In contrast with 2023, new supply in 2024
is forecast to be modest, which will likely
prove serendipitous for the market. Demand
from tenants appears to be ﬁ rm, and with
the next new oﬃce addition slated for mid2025, more absorption is likely to take placeand vacancy levels should improve overall,leading to greater stability in the market
going forward.

Regional Japanese Oﬃce Markets

GRAPH 17: Vacancy Rate in Sapporo City by Area, 2011
to Q1/2024
Average
Station East-West
Outer South

Station Front
Park South
Station North

20%

VACANCY

15%

10%

5%

0%

Source Miki Shoji, Savills Research & Consultancy

GRAPH 18: Average Rent in Sapporo City by Area, 2011
to Q1/2024
Average
Station East-West
Outer South

Station Front
Park South
Station North

14,000JPY / TSUBO / MONTH

13,00012,00011,00010,000
9,000
8,000
7,000
6,000

Source Miki Shoji, Savills Research & Consultancy

SAPPORO CITY
Supply and Demand
In 2023, the oﬃce market experienced
the largest inﬂux of new supply since2017, with roughly 11,000 tsubo of
NRA completed throughout the year.
The market appears to have responded
positively in large, with tight vacancy
rates continuing due to strong demand,
particularly from IT and business process
outsourcing ﬁrms.
In late 2024, Hokkaido Shimbun will
occupy nearly 5,000 tsubo of oﬃce spacein its newly completed headquarters, the
Hokkaido Shimbun East 4-Chome Projectbuilding located in the Station Front area.
Additionally, CONNECT SAPPORO is
slated to deliver over 2,500 tsubo of oﬃce
space in the Park South submarket.
Sapporo will welcome a large amount of
new oﬃce supply in both 2024 and 2025,
each year exceeding 10,000 tsubo. Thatsaid, many new oﬃces may give periodsof free rent but are unlikely to lower rents,
since many landlords are conﬁdent of therental growth trend.
Vacancy
The average all-grade vacancy rate in
Sapporo loosened slightly by 0.1ppts HoH
to 3.0%. Nevertheless, vacancy levels in
Sapporo remain tight. At the submarket
level, there were minimal changes.
Despite the addition of nearly 2,000
tsubo of new oﬃce space from the new
Keiwa Odori Building 51, the Station
Front submarket experienced a 0.3ppts
HoH decrease to 2.6%. This decline wasdriven by major tenant relocations fromnearby submarkets towards more modern
oﬃces in the submarket, as well as oﬃce
expansions in existing premises.
The Station North submarket also
welcomed around 1,500 tsubo of new oﬃce
space from T-Plus Sapporo, and averagevacancy in the submarket increased slightly
by 0.2ppts HoH to 7.0%. Elsewhere,
the Outer South submarket saw thelargest increase in vacancy of 0.5 ppts
HoH to 3.1%, with a handful of tenants
downsizing their oﬃce footprints.
Rent
Asking rents in Sapporo remain on an
upward trajectory after breaking the
JPY10,000 per tsubo level for the ﬁ rst
time in 2023, increasing by 2.8% HoH,
reaching JPY10,300 per tsubo.
Overall, asking rents increased across all
submarkets in Sapporo. The more aﬀordable
Outer South submarket experienced thelargest rental growth of 3.6% HoH to
JPY8,400 per tsubo. New oﬃces also
contributed to the overall upward rental
trend, with Station North experiencing a
notable uptick of 2.4% HoH to JPY13,500 per
tsubo and Station Front increasing by 1.6%
HoH to JPY13,300 per tsubo.
Outlook
Sapporo’s submarkets have enjoyedconsistent improvements. The market
appears to respond well to new additions
despite high asking rents. For instance, theNTT Urban Development’s North 1 West 5
project reportedly has asking rents aroundthe mid-JPY20,000 per tsubo level, and overhalf of the building appears to be pre-leased.
Meanwhile, notable levels of capital
have been ﬂowing into the Sapporo oﬃce
market by both domestic and foreign
investors, which are rumoured to betargeting opportunities at a mid-3% to
mid-4% cap rate.
Looking ahead, the elevated supply
forecast for 2024 and 2025 should drive
rental growth further, though vacancy
rates should remain tight, owing to strong
interest from potential tenants and many
developments are projected to be largely
ﬁlled upon completion.

For more information about this report, please contact us

Savills JapanJon Salyards
Managing Director,
Institutional Investment Advisory+81 3 4330 3266
jsalyards@savills.co.jp

Savills Research
Andy Hurfurt
Managing Director,
Institutional Investment Advisory+81 3 4330 3328
ahurfurt@savills.co.jp

Tetsuya Kaneko
Managing Director, Head of
Research & Consultancy, Japan+81 3 4330 3103
tkaneko@savills.co.jp

Simon Smith
Regional Head of Research& Consultancy, Asia Paciﬁc+852 2842 4573
ssmith@savills.asia

Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offi ces and associates throughout the Americas, the UK,continental Europe, Asia Paciﬁc, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. This report is for general informative
purposes only. It may not be published, reproduced or quoted in part or in whole, nor may it be used as a basis for any contract, prospectus, agreement or other document without prior consent. While every effort has
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