This residential submarket in Tokyo has a 19.6% rental premium

It has surpassed pre-COVID levels since last year.

In Q3/2023, rents in Tokyo’s 23 wards (23W) have observed marginal increments from the previous quarter, approaching levels seen in the pre-pandemic period. 

According to a Savills report, the overall market sentiment is positive, as companies have been encouraging greater levels of office attendance, contributing to sustained positive net-migration into the 23W. 

Here’s more from Savills:

From June to August 2023, net-migration into the 23W exceeded 18,000 people, which can be broken down into movements between Japanese and foreign nationals. The foreign national population increased by more than 13,000 people, which is approximately six times higher than that of the same period before the pandemic in 2019. 

In contrast, the Japanese population increased by just under 5,000 people, approximately one third of that in 2019, but a remarkable improvement compared to the negative net-migration seen in 2021 and 2022. Overall, net-migration has been recovering, largely driven by the number of foreign nationals, while Japanese population growth may take more time to recover. 

The central five wards (C5W) rental premium over the 23W average is at 19.6% in Q3/2023, and has continued to surpass pre-pandemic levels since 2022. While the outer submarkets have also experienced increased average rents, probably due to the persistence of hybrid work arrangements, the return of more workers to offices is likely to drive up demand for units closer to the city centre. 

Furthermore, young professionals who have benefited from recent significant wage growth tend to prefer the convenience of living in central areas closer to their workplaces. With multiple upcoming developments that will transform the landscape of central Tokyo, the C5W is poised to continue attracting residents and emerge as an increasingly appealing residential area moving forward.