Thought Leadership

The rapid vaccine rollout, increasing corporate profits, and limited supply should give the market some much needed breathing room.

• The lukewarm market sentiment continued to weigh on office rents and vacancy in the central five wards (C5W) this quarter.
• Average Grade A office market rents in the C5W fell 2.2% quarter-on-quarter (QoQ) and 8.2% year-on-year (YoY), and now stand at JPY34,370 per tsubo per month.
• The average Grade A office vacancy rate in the C5W increased by 0.8 percentage points (ppts) QoQ and 1.8ppts YoY to 2.5% in Q3/2021.
• Average large-scale Grade B office rents declined to JPY26,106 per tsubo per month – a contraction of 2.5% QoQ and 8.4% YoY.
• The average vacancy rate in the Grade B market loosened by 0.5ppts QoQ and 2.3ppts YoY to 3.3%.
• With the rapid vaccination rollout, strong corporate profit growth and limited supply until 2023, market sentiment should begin to stabilise or even improve.
• The poor performance of less accessible and older offices remains a drag on the office market overall. Meanwhile, tenant preferences for easily accessible and new offices persist.

This article was originally published in https://www.savills.com.hk/

Although rents have weakened, occupancy rates see a slow recovery.

• Rents in the Tokyo 23 wards (23W) fell by 0.9% quarter-on-quarter (QoQ) and 3.6% year-on-year (YoY) to JPY3,929 per sq m this quarter.
• Average mid-market rents in the central five wards (C5W) saw a small decline this quarter and are now at JPY4,661 per sq m – a fall of 0.2% QoQ and 3.6% YoY.
• The C5W premium has inched up to 17.9% – up 0.3 percentage points (ppts) from Q2/2021.
• In the C5W, average rents for units in the 15-30 sq m size band have again decreased this quarter. However, the 30-45 sq m size band saw a small increase in rents.
• The average occupancy rate in the 23W rose by 0.2ppts to 95.6%. The C5W saw a similar increment, increasing 0.2ppts to 94.5%.
• The C5W has seen a population decline, driven by younger families who appear to prefer larger units.

This article was originally published in https://www.savills.com.hk/

In a broadly stable market, some signs of leasing activity were detected in Central, while F&B again proved to be the go-to sector for landlords.

• The market has been relatively stable over the third quarter with retail sentiment weak, while F&B has remained a rare bright spot.
• Dining-out or ‘eat-cations’ have become the ‘new holiday’ for locals, supporting the F&B sector across all price points.
• Leasing activity in core locations remains largely subdued except Central which continues to benefit from its reliance on high-end local demand.
• Rents in both the prime street shop and major shopping centre segments have stabilised and registered a QoQ growth rate of 0.4% and 1.2% respectively.

This article was originally published in https://www.savills.com.hk/