Osaka Real Estate Market Forecast

According to the Oxford Economics Forecast in March 2021, Osaka’s real GDP is expected to see growth of 2.1% in 2021. There are downside risks including the delay in domestic and global economic recoveries due to the extension of the COVID-19 pandemic. This passage examines the leasing market, the investment market, and the catalyst for a post-COVID market in Osaka for forecasting.

Leasing Market

The vacancy rate rose to 1.7% at end of Q4 2020, increasing about 40 bps q-o-q and 150 bps y-o-y. Due to the prolonged COVID-19 pandemic, the cancellations by tenants are gradually surfacing, and the vacancies are increasing by the quarter. The average gross rent is JPY 24,095 per tsubo per month at end of Q4 2020, which has decreased 0.4% q-o-q and increased 3.4% y-o-y. JLL expected that the vacancy rates will continue to rise moderately while rents are slated to decline gradually. 

(Source: JLL)

Due to the new supply scheduled and the increasing vacancies in existing buildings in the Hommachi area in Osaka, the downward pressure on rents is still increasing, while rents in the Umeda area were still stable. 

Grade B buildings are becoming a higher priority than Grade A buildings

Under the COVID-19 pandemic, the amount of floor space seen as necessary is continuing to decrease as the companies need to cut costs. As Grade B buildings are cheaper and smaller than Grade A offices, Grade B offices are being selected by companies to fulfill the demand. As result, the competitive buildings in Grade B categories are being taken up quickly by tenants.

According to CBRE, the Grade A rents fell by 1.5% q-o-q while Grade B rents remained unchanged. It is because landlords need to lower their rent for attracting tenants. Therefore, CBRE predicted that there is a further 2.9% decline in Grade A rents over the next year, while Grade B rents will drop relatively milder with 2.3%.

(Source: CBRE, Q2 2021)

Investment Market

According to the JLL Osaka Market Report Spring 2021, it is predicted that investor appetite will remain high, and the cap rates will be flat. However, the capital values are most likely to decline in line with the decreasing rent. 

(Source: JLL)

The capital value has decreased by 0.5% q-o-q and increased by 3.9% y-o-y in Q4 2020. The investment volume fell 21% y-o-y to JPY 167.6 billion.  Regarding the sectors involved, investment volume in the retail and hotel sectors fell sharply due to the obstacles brought by COVID-19. The office sector also decreased slightly. On the other hand, the demand for logistics has boosted sharply, which causes an increase in investment volume in logistics.

(Source: JLL)

Osaka Super City Initiative

Osaka’s real estate market was greatly affected by the COVID-19 pandemic. To fight against this dilemma, Osaka Prefecture and Osaka City are cooperating to turn Osaka to become a Super City, which is expected to provide advanced services for citizens, create data linkage across multiple areas, and promote dynamic regulatory reform. There are projects that includes but are not limited to

The Umekita Second Project – A world-class, top-quality urban space

Expo 2025 Osaka, Kansai – April 13 to October 13, 2025

The Yumeshima Development Plan -

Conclusion

Osaka is one of Asia’s leading cities in international business following Tokyo. Kansai International Airport – Japan’s only 24-hour operating airport hub – supports business travel and exchanges of people between, Osaka, Asia, and the world. Therefore, many Japanese enterprises use the city as their base in Japan but also for their headquarters. In addition, the overall climate, healthcare, and safety in Osaka is very good. For people who are looking for a better quality of life with lower living costs such as utilities, food, and accommodation, they will choose to invest and live in Osaka. We also found that more far-sighted institutional investors and professional buyers are flocking into Japan’s real estates, there will be a positive effect of Osaka’s residential property market.