APPD Market Report Article


August 26, 2022

Yuto Ohigashi, Senior Director - Research, Japan


JPY 22,885


Demand for new and existing buildings increases

  • According to the June Tankan survey for Greater Osaka, the sentiment score among large manufacturers was an 8, decreasing 9 points compared to the previous survey in March, and deteriorating for the second consecutive quarter. The sentiment in large non-manufacturers increased by 2 points to 8 points, improving for the eighth consecutive quarter.
  • Net absorption totalled 8,000 sqm in 2Q22. The operation of new buildings has been improving and demand for existing buildings is recovering. Strong occupier demand was observed in scientific research, professional and technical services, manufacturing, and education and learning support industries.

Vacancy rate declines to 3.5%

  • No new supply entered the market in 2Q22. One new supply addition will enter the market next quarter; namely, the Nippon Life Yodoyabashi Building, with a NLA of 35,000 sqm. The building is due for completion in August 2022.
  • The vacancy rate stood at 3.5% in 2Q22, decreasing 40 bps q-o-q and increasing 150 bps y-o-y. Vacancy rates declined for the first time in ten quarters as there was no new supply this quarter and vacancy in new buildings as well as in existing buildings declined.

Rent decline slows slightly

  • Gross rents averaged JPY 22,885 per tsubo per month at end-2Q22, decreasing 0.7% q-o-q and 3.6% y-o-y. The rent decline has slowed slightly with the improvement in the vacancy rates.
  • Capital values decreased 1.0% q-o-q and 5.7% y-o-y in 2Q22. Cap rates were flat. There were no transactions for Grade A office buildings during the quarter.

Outlook: Rents continue to decline slightly and cap rats to remain flat

  • According to the Oxford Economics forecast as of June, Osaka’s real GDP is forecast to grow by 1.7% in 2022. Downside risks include the impact on corporate profits from surging raw material prices.
  • As new supply is planned for the second half of 2022, vacancy rates are expected to rise moderately again, and rents are expected to continue declining moderately. Investor appetite is likely to remain high and cap rates are expected to remain almost flat.

Note: Osaka Office refers to Osaka's 2 Kus Grade A office market.

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