Tokyo to grow office supply significantly until 2026

The sizeable supply expected in 2025 will be sandwiched between quiet years.

Analysts at Savills expect 2024 and 2026 to be years with comparatively little office supply spread out across different submarkets in Tokyo, and should give some breathing room for most submarkets to absorb supply added in previous years, especially with market rumours pointing towards good pre-leasing progress for some supply from 2024 onward, which suggests that prime offices will likely remain sought after. 

However, 2025 will be another year of sizable supply, which will be mostly concentrated in the Takanawa submarket, with the enormous Takanawa Gateway City complex scheduled for completion. 

Here’s more from Savills:

While there were some initial concerns regarding the size of the development in contrast to the relatively poor performance of offices in Minato ward, especially in the bay area, some large tenants have reportedly already been secured. Indeed, this comprehensive development includes liveable residential space and an international school, which should allow it to lure a number of high-profile residents, and make the area more attractive for office and other tenants. 

For instance, KDDI will be taking a lease of almost 30,000 tsubo in the building, moving out of their headquarters in Iidabashi, Chiyoda. This should set a strong precedent for the development, and continue contributing to strong pre-leasing activity. 

At the same time, the large amount of secondary vacancy created as a result might create some cracks in the tight Chiyoda office market. However, such scenarios also present pockets of opportunity; KDDI has occupied its current building for two decades, meaning that large-scale refurbishments are likely in the crosshairs. This should take more than a year, especially when considering the labour shortage in the market, meaning that many initiatives can be conducted to alleviate secondary vacancy.

Elsewhere, Tokyo Tatemono is likely to take a sizable lease of several thousand tsubo in its Yaesu 1-Chome East B redevelopment, another large project in 2025. Hence, the overall outlook for 2025 should not be disruptive to the market.