APPD Market Report Article


November 29, 2022

Yuto Ohigashi, Senior Director - Research, Japan


JPY 22,667


New supply completes with high occupancy

  • According to the September Tankan survey for Greater Osaka, the sentiment score among large manufacturers was a 10, increasing 2 points compared with the previous survey in June, the first improvement in three quarters. The sentiment score of large non-manufacturers also increased by 2 points to 10 points, improving for the ninth consecutive quarter.
  • Net absorption totalled 35,000 sqm in 3Q22. The increase from 2Q22 was due to high occupancy of the newly completed building, which included the move-in of a key tenant, the Kansai head office of a major construction company.

Vacancy rate declines to 3.4%

  • One new building, the Nippon Life Yodoyabashi Building, entered the market in 3Q22. The 25-storey building has a GFA of 49,000 sqm, with office space occupying the 3rd to 25th floors, and an NLA of 35,000 sqm.
  • The vacancy rate stood at 3.4% in 3Q22, decreasing 10 bps q-o-q and increasing 40 bps y-o-y. Vacancy rates declined slightly due to high occupancy of the newly completed building as well as decreased vacancy in existing buildings.

Rental price decline accelerates slightly

  • Gross rents averaged JPY 22,667 per tsubo per month at end-3Q22, decreasing 1.0% q-o-q and 3.9% y-o-y. While the vacancy rate has declined for two consecutive quarters, rents continued to drop in anticipation of a further rent fall due to a large supply influx expected from 2024 onwards.
  • Capital values decreased 1.4% q-o-q and 6.1% y-o-y in 3Q22. The decrease has accelerated, in tandem with an accelerating decline in rents. Cap rates were flat. There were no transactions for Grade A office buildings during the quarter.

Outlook: Rents to continue slight decline while cap rates to remain flat

  • According to the Oxford Economics forecast as of September, Osaka’s real GDP is forecast to grow by 1.7% in 2022. Downside risks include concerns about a decline in exports due to the global economic slowdown, and a deterioration in corporate earnings due to the weaker yen.
  • As new supply should remain limited in 2023, a moderate rise in vacancy rates and a moderate decline in rents are expected. Investors are becoming cautious due to changes in global economic conditions. However, investment appetite is likely to remain robust, while 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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