Further increase in net absorption driven by strong occupier demand

• Net absorption in Tokyo’s Grade A office market reached 69,000 tsubo in Q1 2026, increasing from 38,000 tsubo in the previous quarter.
• Demand has been driven by employees returning to offices and business expansion, primarily centered on manufacturing, IT, and professional services sectors.

Vacancy rate remains unchanged q-o-q at 0.7%

• Four new Grade A office buildings, including Tofrom Yaesu Tower (NLA: 31,300 tsubo), Takanawa Gateway City The Linkpillar 2 (NLA: 26,900 tsubo) and Sumitomo Fudosan Shiba Koen (NLA: 6,200 tsubo), and Omotesando Grid Tower (NLA: 3,300 tsubo) were completed in Q1 2026, increasing total stock by 3.5%.
• Tokyo’s Grade A office vacancy rate in Q1 2026 was 0.7%, unchanged q-o-q and down 1.8 pp y-o-y. 

Rents rise for the ninth consecutive quarter

• The average monthly gross rent per tsubo was JPY 40,247, up 5.2% q-o-q and 13.2% y-o-y in Q1 2026.
• Capital values in Q1 2026 rose 5.5% q-o-q and 16.4% y-o-y, accelerating from Q4 2025, as strong rent momentum offset rising cap rates. Notable Grade A transactions included the purchase of Dentsu HQ Building by Brookfield for 300 billion JPY.

Outlook: Future rent projections remain unchanged from the previous quarter despite downside risks from the US-Iran conflict

• According to Oxford Economics’ forecast as of March 2026, projections for real GDP growth in 2026 were revised down to 0.3% on the back of the conflict in the Middle East.
• In Tokyo’s Grade A office leasing market, solid tenant demand continues while delays in new building completions are occurring due to labor shortages and rising construction costs. With the supply-demand balance tightening, rents are expected to maintain an upward trend going forward.