CBRE announced today its first ever Japan Retail Marketview, a new quarterly report to be published alongside existing reports on logistics and office markets. The report, which will be available on April 25, covers the Tokyo, Osaka and Nagoya markets for Q1 2014. The Q1 2014 MarketView will cover retail market trends across Tokyo, Osaka and Nagoya’s core retail areas. The report will also cover the outbound activities of Japanese retailers as well as capital market transactions of retail properties.
Hot Topics
- Strong sales of big ticket items and durable goods with consumers rushing to buy before the tax hike
- Increasing concerns of weakening consumer sentiment with increasing CPI and consumption tax
- Demand spreads to side streets as stock in prime locations remain scarce
- Rents rising with tight supply and continuous demand
Tokyo (Ginza, Omotesando/Harajuku, Shinjuku, Shibuya)
In prime locations, Tokyo’s core retail submarkets continue to experience low vacancy. The number of new store openings was low overall because New Year’s and end-of-season sales are held in January and February. However, tenant demand remained firm throughout Tokyo’s core retail submarkets. As available space along the prime streets remained scarce, tenants seeking space expanded their search area to side streets within prime neighborhoods. In Omotesando, where a small quantity of vacant space was available on the side streets, demand has expanded to side streets like Kotto-dori and Ura-Hara. As a result, availability of vacant space is now even lower. The same situation applies to the other submarkets as well, where tenants competing for space becoming available must act fast as space is being snapped up quickly. The tight supply is expected to continue as very little new supply is expected to come online in the near term.
There are a number of major redevelopment projects that have been announced since 2013. Ginza is expecting three major redevelopment projects, with one coming online this year. Shinjuku is also expecting two new developments within the year, and tenants are already being secured for the retail space of the new developments.
“Tokyo is clearly a stepping stone to Asia, as can be seen with the quantity of foreign brands opening new stores in 2013 and beyond,” said Shina Fukui, director of CBRE’s Tokyo Retail Services team. “However, there is not enough supply in the market right now to absorb the tenant demand, thus both domestic and foreign retailers are expanding their search from the prime areas to side streets. With the Olympics coming to Tokyo in 2020 demand from sports retailers, among others, is expected to strengthen going forward.”
Osaka (Shinsaibashi, Umeda)
Osaka’s core retail submarkets are also experiencing tight supply with increasing demand. A number of foreign brands that already have stores in Tokyo but have yet to enter Osaka, are examining the possibilities of opening stores along Midosuji in the Shinsaibashi area. However, the lack of available space is making decisions difficult for retailers. While foreign brands have strict requirements and prefer to open in prime locations, some have expanded their search to side streets there as well. While new supply is scheduled to come online this year, the continued firm demand from retailers will likely keep supply tight.
Well-known tenants that are expected to attract high foot traffic have already been secured for new developments coming online in the Umeda and Shinsaibashi areas in 2014.
“There are a number of foreign retailers that have not yet been able to open stores in the Osaka area,” said Tsuyoshi Hashikawa, senior director of CBRE’s Kansai Retail Services team. “Demand for space is growing stronger, but the lack of supply is a critical challenge. We are expecting new supply this year, but tenants have already been secured, and the lack of space is anticipated to continue,” he added.
Nagoya (Sakae)
Demand continues to be high in the Sakae area, mainly from apparel retailers. High street supply is concentrated along Otsu-dori, between the Mitsukoshi Department store and PARCO, but available space remains very low. Given the tight supply and high tenant demand, tenants are expanding their search to the side streets, including Isemachi-dori. This willingness of retailers to expand into side streets is expected to increase the overall market size of Sakae.
In 2014, PARCO’s new development, Zero Gate, is expected to come online. As this development is located off Otsu-dori and towards Isemachi-dori, demand is anticipated to be pulled in that direction.
“Sakae’s retail market has not been able to expand, with tenants preferring Otsu-dori,” said Noriyuki Kawamoto, director of CBRE’s Nagoya Retail Services team. “Tenants are now willing to look outside this area to side streets such as Isemachi-dori. PARCO’s Zero Gate will open this fall, and this is expected to expand the move to Isemachi-dori. With currently lacking supply, this new supply is anticipated to resolve some of this problem,” he added.
For more information and insight into the high street markets of each city, please review the Japan Retail MarketView Q1 2014, to be released on April 25th, 2014.
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CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2014 revenue). The Company has more than 70,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 400 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website at www.cbre.com.
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