Regional Japanese cities to see elevated volumes of new office completions this year

Osaka will welcome over 90,000 tsubo of NRA in 2024.

In a report, Savills said many Japanese companies have enjoyed record profits in 2023 and 2024, and business sentiment is notably positive. Top global players in niche markets and services focusing on inbound businesses seem to be performing strongly. 

Indeed, there is a meaningful connection between corporate performance and office rental growth, which should be supportive for regional office markets in Japan. 

Here’s more from Savills:

Many firms are reassessing their office needs and carrying out long overdue renovations and relocations. Moreover, a large proportion of firms across Japan appear to be gradually phasing out flexible work arrangements, and are therefore focused on providing quality and flexible workspaces that support communication and improve wellbeing in order to encourage workers back to the office, especially in the current tight labour market. 

Hence, modern, mixed-use office developments that can support such new workstyles are enjoying significant attention, despite slightly more premium rental levels. Properties with strong ESG certifications appear to be especially attractive. 

Overall, 2024 will be another busy year for office completions across many regional cities in Japan. Osaka, Nagoya, and Fukuoka will all welcome elevated volumes of new supply over the year. Considering that some premium new additions over the past year had initially struggled to gain traction, observers may have some concerns regarding temporal instability in respective markets over the year. 

This is especially the case in Osaka, which will welcome over 90,000 tsubo of NRA in 2024, the most notable addition being GRAND GREEN OSAKA, which will fundamentally transform the Osaka station area. 

Elsewhere, several large-scale mixed use office developments as part of the Tenjin Big Bang scheme look to herald major changes to the Fukuoka office market, while Sapporo will welcome large amounts of new office space in anticipation of the extension of the Hokkaido Shinkansen to Sapporo in the early 2030s. That said, pre-leasing has been sound among many incoming office properties, due to the high demand for modern office space, and there is only some concern.