Tokyo Rental Market to Surge Through the Year

Tokyo 23W Residential Market Shows Strong Momentum

The Tokyo 23W residential market continues to demonstrate robust performance, with stable occupancy rates expected to persist. According to a recent report by Savills, the market maintained healthy momentum during the third quarter of 2025. Average rents increased across all submarkets, with particular strength observed in the Outer and Inner East areas.

The report highlighted that seasonal dips in occupancy rates align with historical lease renewal patterns. Landlords appear confident in maintaining rental levels, even if it means accepting slightly higher vacancy rates. This suggests a strong belief in sustained demand for housing in the region.

Factors Driving Leasing Demand

One of the key drivers behind the continued resilience of the Tokyo 23W market is strong net migration. Over the first three quarters of 2025, inflows of residents are on track to match levels seen in 2024. The steady influx of foreign nationals has further bolstered leasing activity, contributing to the overall stability of the market.

In addition to migration trends, the prices of for-sale condominiums remain elevated due to rising construction and land costs. According to the Real Estate Economic Institute, 8,275 new condominium units were introduced to the market in 2024 within the 23W area. This figure represents a 32% decline compared to the five-year average between 2019 and 2023. The number of new units is expected to continue decreasing, with the first half of 2025 recording 2,964 new units—a 11% drop from the same period in 2024.

Rising Prices and Rental Market Growth

The average price of new condominium units has been steadily increasing, and the 2025 average is projected to reach an all-time high. As more residents find themselves priced out of the for-sale market, there is a growing trend of potential buyers turning to the rental market instead. This shift is helping to sustain strong demand for rental properties in the 23W area.

Elevated borrowing costs are also expected to rise further, as potential future policy rate hikes may increase the cost of mortgages. These factors could push more prospective homeowners into the rental market, reinforcing the demand for rental accommodations in the coming months.

Demographic Trends and Future Outlook

Looking ahead, Tokyo’s demographic fundamentals are expected to provide a solid foundation for the residential leasing market. Although affordability concerns are beginning to affect younger households, pushing some residents outward, this redistribution of demand may help spread rental growth more evenly across the metropolitan area rather than weakening the overall market.

Inbound foreign nationals are anticipated to remain a significant factor in driving leasing activity. With landlords maintaining pricing discipline in a supply-constrained environment, the Tokyo 23W residential market is likely to experience sustained rental growth and stable occupancy rates throughout the remainder of 2025.

Key Takeaways

• The Tokyo 23W residential market shows strong momentum in Q3/2025, with average rents rising across all submarkets.
• Seasonal dips in occupancy rates are consistent with historical patterns, and landlords are maintaining rental levels despite slight increases in vacancies.
• Strong net migration and an influx of foreign nationals are supporting leasing demand.
• The number of new condominium units has declined significantly, contributing to higher prices and increased pressure on the for-sale market.
• Elevated borrowing costs and potential policy rate hikes may redirect more buyers toward the rental market.
• Demographic trends and the continued presence of foreign nationals are expected to support sustained rental growth and stable occupancy through 2025.