Central Tokyo Office Rents Surge as Construction Costs Push Up Rates for New Supply

Grade A office rents in Tokyo’s central five wards jumped in the first quarter of 2025 as greater construction costs pushed up asking rents for incoming supply, triggering elevated rates in the broader market, according to Cushman & Wakefield.

Assumed achievable rent in the five key wards surged 6.1 percent year-on-year in the January-March period to an average $81.86 per square foot per year, the consultancy said in its latest Tokyo Office Marketbeat report. That figure outpaced growth in asking rent, which rose 4.5 percent to $87.18 on average across Chiyoda, Chuo, Minato, Shibuya and Shinjuku.

The vacancy rate in the five wards sat at 2.8 percent, down from 4.3 percent a year earlier, while the availability rate was 4.2 percent, easing from 6 percent in the year-ago period. Of 35 tracked submarkets, 13 reported availability of less than 1 percent.

“In addition to rising occupancy rates, construction costs have increased by a cumulative 29 percent since 2019,” the report said.

Vacancies Vanish

Annual net absorption in the five wards rose to 6.7 million square feet (622,450 square metres) in the first quarter, up 53.6 percent year-on-year, according to Cushman & Wakefield.

“Leading indicators suggest few large-scale vacancies ahead, with the quarter-end precommitment level at 84.4 percent for newly completed buildings,” the report said. “With rising relocation costs, existing tenants are increasingly securing additional space within the same building, reducing net expansion in vacant stock from new supply.”

In Chiyoda’s prime Marunouchi/Otemachi area, asking rent rose 3.4 percent year-on-year to $109.31 as vacancy dipped to 0.5 percent from 1.6 percent a year earlier.

The survey of the central five wards encompassed 219 office buildings completed after 2000, each with a net leasable area of at least 142,333 square feet.

Steady Employment Growth

Over the next two years, Tokyo’s office-related employment is projected to grow at a compound annual rate of 1 percent, adding 20,000 workers a year, per Cushman & Wakefield.

The consultancy forecasts Grade A office vacancy in the central five wards to rise temporarily above 3 percent in 2025 due to increased supply of more than 5.6 million square feet, before declining again in 2026 amid limited new supply and robust demand for high-grade office space.

“During this period, we expect rental growth at CAGR of 4 percent in most submarkets with vacancy rates of less than 2 percent, and around 2 percent in the remaining submarkets,” the report said.