Robust demand continues with a significant concentration of tenants in Umeda, where office stock turnover is ongoing

• The March Tankan Survey for Greater Osaka showed that business sentiment fell to 10 points from 13 for large manufacturers and rose to 30 points from 28 for large non-manufacturers.
• Net absorption totalled +33,000 sqm in Q1 2025 Solid demand for office spaces continues, driven by the expansion of companies, the improvement of office equipment, finding better locations to meet workplace hiring and retention strategies, and consolidating locations to encourage worker collaboration. Relocation activity was significant among companies in information services, such as software development and business process outsourcing companies.

The vacancy rate fell from the last quarter, but y-o-y is stable at 3.1%

• There were no new completions in the quarter. The Q1 2025 vacancy rate fell to 3.1%, a decrease of 130 bps q-o-q and unchanged y-o-y.
• With some large companies relocating to existing and newer buildings in the Umeda area, a significantly decrease in vacancies were seen.

More landlords lift rent levels in a market with decreasing vacancies

• The average monthly gross rent per tsubo was JPY 23,799, an increase of 1.7 % q-o-q and 5.2 % y-o-y.
• Reflecting the steady increase of commitment rates in newer completions, particularly which completed in 2024, the largest supply year of all time, some landlords raised rents both in existing and new buildings.

Outlook: Accelerating rental market; fewer assets for sale to slow down investment market

• According to the March Oxford Economics forecast, Osaka City’s real GDP is projected to grow by 0.2% in 2025 and 0.1% in 2026. Strong demand for the improvement of office equipment is likely to continue due to a change in the workplace mindset.
• While increased supply through two projects is expected this year, and the vacancy rate will rise, steady demand for high-grade buildings is projected, with vacancies filling quickly. Investment in the Osaka office is expected to fall as assets for sale continue to be limited while better fundamentals are attracting investor. An increase in CRE sales by listed companies is expected, but few properties will be sold to convert to multi-tenant office assets due to their specifications, location, fit-out needs or age.