Strong leasing momentum continued in Q4, with full-year net absorption reaching a record-breaking level

• Net absorption in the Tokyo Grade A office market reached 124,700 sqm, marking a record year. Demand was led by professional services, IT firms, and manufacturing sectors.
• Notable leasing activity during the quarter included the relocation of the corporate headquarters of a large multinational corporation and the pre-leasing of a large-scale project, scheduled for completion after 2030, by a major domestic company.

Total vacancy declined by a further 20 bps to 0.7%, underpinned by robust demand for prime office space

• One new Grade A office building, Akasaka Trust Tower (Minato Ward; 43 storeys; NLA 105,834 s.m.), entered the market in Q4 2025 with near-full occupancy, accounting for nearly 20% of total completions for the year.
• Tokyo’s Grade A office vacancy rate averaged 0.7% in Q4 2025, down 20 bps q-o-q and 210 bps y-o-y.

Rents rise for an eighth consecutive quarter

• The average monthly gross rent per tsubo was JPY 38,252, up 3.3% q-o-q and 9.4% y-o-y at end Q4 2025.
• Capital values rose 3.6% q-o-q and 13% y-o-y in Q4 2025 as continuing rent growth more than offset a small cap rate increase from the previous quarter. Notable transactions included FPG’s additional stake in Kyoboshi Trust Tower for JPY 14 billion.

Outlook: Continued rental increase and rise in capital values are projected for 2026 with incremental cap rates rises

• According to Oxford Economics’ forecasts as of December 2025, 2026 real GDP growth was revised up 10bps to 0.7% and end-2026 CPI projections raised to 2.0%. Key risks include yen-induced inflation acceleration and overseas economic downturns.
• Leasing volume is expected to slow down as fewer new completions will enter the market, however, office demand is likely to remain robust as tenants proactively seek to upgrade.