Tetsuya Kaneko, Director, Head of Research and Consultancy for Savills Japan discusses Tokyo's rental market including rents by unit size and occupancy rates.
Tokyo’s rental market is principally made up of compact single-occupier units, typically less than 45 sqm (13.6 tsubo) in size.
Such units can often make up as much as 75% or more of the 23W area’s rental listings.
Unlike other major global cities such as London and New York, house or apartment sharing does not form a major segment of the rental market.
As a result, there is a large, stable market for small- to mid-sized units.
Rents across all size bands contracted in Q2 2018 but continued to grow steadily on an annual basis.
Average rents in the 15-30 sqm size band now stand slightly lower than last quarter at JPY4,493 per sqm, but continue to command the highest rent per sqm as young workers with a preference for smaller units migrate to central Tokyo and bolster demand.
Properties in the 30-45 sqm size band now sit at JPY4,300 per sqm.
Average rents for listings in the 45-60 sqm size band remained higher than those in the 30-45 sqm size band for a second consecutive quarter, at JPY4,369 per sqm.
Average occupancy rates in Tokyo remain high, with the current 23W average 0.2ppts higher than the prior year at 96.9%, though this is 0.5ppts lower than last quarter.
C5W average occupancy fell more than the 23W average this quarter, down 1.1ppts QoQ but still up 0.2ppts YoY, finishing Q2/2018 at 96.1%.
Only a very small number of apartments registered occupancy below 90% this quarter, suggesting the overall decrease was temporary and due to tenant relocations rather than excess supply.
The largest increases in occupancy this quarter came from peripheral wards Ota and Edogawa, each up 1.3% QoQ, with the latter registering 100% occupancy, a feat not seen across the whole of the 23W since Q3/2012.
Each member of the C5W saw lower occupancy this quarter: Shibuya fell the least, down just 0.2ppts QoQ, while Shinjuku fell the most, down 2.6ppts after a strong increase last quarter.
While changes in occupancy across submarkets varied this quarter, over the longer term the range between highest and lowest occupancy continues to narrow, highlighting the high demand for institutional-quality assets across all of Tokyo.
Strong fundamentals including a robust economy and increased demand for centrally located homes should contribute to leasing demand and support the institutional market for the time being.
For more information or to discuss occupancy rates in Tokyo, phone or email Tetsuya Kaneko, Director, Head of Research and Consultancy, Savills Japan, via the contact details listed below.
Related reading:
Mid-market rental trends by survey area
Beyond Tokyo 2020: Prospects for the Japanese real estate market