C&W's Q3 2025 Tokyo Office Market Report Reveals Declining Vacancy Rates

C&W's Q3 2025 Tokyo Office Market Report Reveals Positive Trends

In its latest analysis, Cushman & Wakefield (C&W) has spotlighted the improving conditions within Tokyo's office market, forecasting significant growth and stability. As the workforce continues to expand, the number of office workers in Tokyo has seen a notable increase of approximately 70,000 annually. This surge is contributing to a decreased vacancy rate, which has dropped below 1% for the first time in five years, indicating robust demand for office spaces.

Economic Overview

The economic landscape for 2025 looks promising, with a projected real GDP growth rate of +1.1% compared to the previous year. Despite uncertainties in the global economy stemming from U.S. import tariffs, strong corporate earnings have bolstered consumer spending and wages. The trend of rising personal consumption due to high-level wage negotiations is expected to continue into 2026, although growth may slow to approximately +0.5% due to limitations such as labor shortages. Companies are forecasting an operating income decline of -2.1%, yet even with this decline, they remain around 40% above the 10-year average, suggesting that businesses can sustain higher rental burdens. Employment figures in Tokyo continue to surpass the national average, with a 1.7% increase year-over-year in Q2 2025, adding to the growth of office worker numbers overall by 1.9%.

Supply and Demand

With consistently high demand, the net absorption of Grade A office spaces in the central five districts at the end of Q3 2025 rose significantly, by 62% year-on-year to 236,000 tsubo. Both the vacancy rate and available space ratio have undergone declines, with the vacancy rate falling below 1% for the first time since September 2020. The availability of leased space is at a historic low, as many secondary vacancies have been filled through expansions. There are also visible trends of upgrades from Grade B offices and relocations motivated by expansion.

New constructions have seen an impressive approval rate of 97.6% within a year of completion. Even in submarkets where considerable space is available, such as Shibaura and Kaigan, which have a vacancy ratio of 30.5%, we anticipate a slow decline due to limited availability in downtown areas.

Rental Trends

In Q3 2025, the average expected rental price for Grade A offices in Tokyo's central five districts climbed by 6.6% from the previous year to 38,198 yen, surpassing pre-pandemic figures. With declining vacancy rates and cumulative construction costs reaching approximately 30% since 2019, the prices for new developments are being reflected in the overall rent increases. Additional pressures on rents are expected to arise from heightened management and common area costs.

Outlook

Looking ahead, the employment numbers related to office work in Tokyo are projected to grow by another 0.5% per year, translating to roughly 8,000 new jobs annually. The incoming supply is anticipated to remain on par with the last decade’s average, but by the end of Q3 2025, the approval rate for new supply will have reached 84.9%. Although there may be some oversupply concerns leading to rising vacancy rates, the overall demand is still strong enough that vacancy rates are expected to remain in the low 1% range until 2027.

A significant portion of new supply planned before 2027 will be concentrated in high-rent submarkets like Kyobashi, Yaesu, and Shibuya. Although the rate of rent increase might slow down, expected rental prices are predicted to continue rising at an average pace of around 5% per year until 2027.

For further details and in-depth information, please access the full report in PDF format.

About Cushman & Wakefield

Cushman & Wakefield (NYSE: CWK) is one of the world’s leading commercial real estate services firms, publicly traded on the New York Stock Exchange. With over 52,000 employees across 400 offices in approximately 60 countries, we are at the forefront of facility management, brokerage, valuation, tenant representation, leasing, and project management. In 2024, the company recorded a revenue of $9.4 billion, showcasing our strong market presence. Our motto, "Better Never Settles," reflects our dedication to an award-winning corporate culture, highlighting our commitment to excellence recognized by industry professionals. For more information, please visit our official website at www.cushmanwakefield.com.