Tokyo's Office Supply Trends: Insights from Mori Trust's 2025 Report

Mori Trust Company, a leading real estate developer based in Minato, Tokyo, has published its latest research on the supply dynamics of large-scale office buildings within Tokyo's 23 wards. This article will summarize key findings, supply trends, and future forecasts derived from their analysis, which has been ongoing since 1986 for large offices and since 2013 for medium-sized offices.

Key Findings of the 2025 Supply Survey

Survey Period: December 2024

1. Supply Volume Trends

In 2024, the supply of large-scale office buildings in Tokyo's 23 districts was recorded at 640,000 square meters, representing a significant drop compared to 1.38 million square meters the previous year. Looking ahead to the next five years, there will be substantial supply figures exceeding 1 million square meters in 2025, 2026, and 2029. However, 2027 is projected to experience a record low supply, indicating an upcoming average supply level of 950,000 square meters will remain below the historical average of 1.04 million square meters.

2. Area Supply Trends

When analyzing data from the last five years and projections for the next five, it's clear that the three central wards (Chiyoda, Chuo, and Minato), which constituted 70% of supply previously, are expected to account for 80% of future figures. Notably, while Chiyoda and Minato's contributions are declining, Chuo's share is rapidly increasing.

In terms of specific district supply centers, future growth is expected to pivot from historically significant areas such as Toranomon and Otemachi to newly emerging zones, including Yaesu, Nihonbashi, and Shirokane.

3. Development Land Supply Trends

Within the central three wards, the percentage of buildings constructed on existing sites decreased from approximately 70% (2015-2019) to around 50% (2020-2024), with expectations of a further decline to only 30% post-2025. Meanwhile, redevelopment of low-utilization land has emerged as a key driver outside these central wards.

4. Medium-Sized Office Supply Trends

In 2024, the medium-sized office supply reached 119,000 square meters, marking the third-highest volume within the last twelve years. However, a downturn is anticipated in 2025 and 2026, where supplies are projected to fall to 96,000 and 43,000 square meters respectively, indicating a downward trend compared to the past decade.

Summary

Overall, the next five years suggest a declining supply dynamic for newly constructed buildings, contrasting with a recovering demand trend, as both new and existing buildings are experiencing increased interest. Notably, the pre-leasing rate for large-scale offices completing in 2024 is already over 80%, while upcoming years (2025 and 2026) will see rates between 60-70%. As recovery from pandemic fallout continues, demand is becoming increasingly robust.

Additionally, the vacancy rate for existing buildings shows improvement, while rents are set to rise in 2024. Although there will be significant supply in 2025 and 2026, growing interest in new constructions alongside expanding needs from existing tenants indicates that market resilience is expected, even during projected low supply years.

Renovation: A Key to Revitalizing Office Markets

By 2029, the potential for rising supply levels exists, driven by diversification across development areas and increased options for businesses. Recent surveys also indicate several buildings facing construction delays due to spiraling costs, leading to revised timelines.

In light of financial pressures and the demand for sustainability, the emphasis on renovation and enhancement of existing buildings is gaining traction, presenting opportunities for improving competitive advantages while continuing to develop new structures.

With a balanced approach towards new supply and renovation efforts, the market is anticipated to foster a growing pool of high-quality office spaces, ultimately stimulating more demand.

Detailed Report

Research Period: January 1, 2024 – December 31, 2024
Conducted by: Mori Trust Company
Research Focus: Office Supply Dynamics
Methodology: Comprehensive analysis of public materials, on-site verification, and developer interviews.

For more detailed information, refer to the following link: Mori Trust Official Announcement

About Mori Trust Company

Mori Trust Company is a comprehensive real estate developer engaged in large-scale urban developments and hotel & resort projects across Japan. Focusing on real estate, hotel & resort business, and investment activities, the company oversees 52 buildings and facilities nationwide. Their commitment to enhancing Japan’s global competitiveness is evident through various initiatives, including the preservation and development of historical structures.