Tokyo office market expected to remain tight amidst limited supply
Nearly fully leased 2026 projects and delayed developments signal persistent supply constraints, which may support further rental and capital-value growth despite investment-market headwinds.
Tokyo Grade A office vacancy was 0.8% in Q2 2026, while rents rose 16.4% year-on-year to JPY 42,109 per tsubo monthly.
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Projects scheduled for completion in 2026 are already nearly fully leased.
Tokyo's Grade A office market remained exceptionally tight in the second quarter of 2026, with strong corporate performance supporting demand even as the absence of new completions resulted in negative net absorption, according to JLL.
Net absorption fell to -5,800 tsubo in Q2, JLL said. The consultancy firm attributed the decline to the lack of new supply rather than weakening demand, noting that corporate performance remained strong. Scientific research, professional and technical services, and manufacturing were among the main sources of leasing demand.
Vacancy increased marginally to 0.8%, up 0.1 percentage point quarter-on-quarter, but remained 1.7 percentage points below its level a year earlier. JLL said availability remained very limited, partly because soaring construction costs have delayed new developments.
Rental growth accelerated. Average monthly gross rent reached JPY 42,109 per tsubo, up 4.6% quarter-on-quarter and 16.4% year-on-year. JLL said rents continued to rise in both the Otemachi/Marunouchi and Akasaka/Roppongi submarkets, with particularly strong growth in Otemachi/Marunouchi supported by its low vacancy rate.
Capital values also strengthened, rising 6.9% quarter-on-quarter and 21.1% year-on-year, according to JLL. The increase accelerated from the previous quarter and reflected strong rental momentum and stable capitalisation rates. No Grade A office transactions were completed during the quarter.
JLL expects the tight market conditions to persist. Existing buildings have very limited vacant space, while projects scheduled for completion in the second half of 2026 are already nearly fully leased. Leasing progress for new supply due to enter the market in 2027 is also described as strong.
The outlook is further constrained by construction delays affecting projects scheduled for 2029, as higher construction costs weigh on development timelines. JLL therefore expects rents and capital values to continue rising, with vacancy projected to fall further into next year.
The investment outlook carries risks, however. JLL highlighted rising government bond yields and inflationary pressure stemming from yen depreciation as potential headwinds.
Overall, JLL's assessment points to a Tokyo office market where limited supply, strong occupier demand and accelerating rents continue to support landlords and property values, despite the temporary negative net absorption figure recorded in Q2.