Flat Prime Rents for High Street Stores in All Three Major Cities
Tokyo, November 7, 2016 - CBRE today released its Q3 2016 Japan Retail MarketView covering retail market trends in Japan’s three major cities: Tokyo, Osaka, and Nagoya.
The number of inbound tourists continued to rise, increasing by 19.0% y-o-y to 1.9mn in September, the highest ever recorded for the month of September. Cumulatively, from January through to September, there were 17.9mn visitors (+24.1% y-o-y), and it exceeded the 20mn mark as of the end of October.
Top prime rents for high street stores in Tokyo, Osaka, and Nagoya were flat q-o-q. However, some properties were able to increase their rents due to a number of potential tenants competing for the space.
Drugstores continued to drive demand, although the total number of enquiries fell in comparison to last year.
Tokyo (Ginza, Omotesando, Harajuku, Shinjuku, Shibuya)
Prime store rents in Q3 2016 (assumed achievable rent, including service charges) were flat at JPY 400,000 per tsubo for the fifth consecutive quarter. Although the number of enquiries fell year-on-year, rents along the Ginza shopping streets have not fallen as prime spaces remain scarce. In Omotesando and Harajuku, the period saw strong demand from sports brands ahead of the Tokyo Olympics. In Shinjuku, retailers looked at high street spaces to open up a flagship store as a means of boosting brand visibility and securing earnings. In Shibuya, there was continued strong demand from retailers targeting the youth demographic.
Akihisa Sato, senior director of CBRE's Retail Services team, commented, "We continue to see several tenants competing for properties in prime locations with rent budgets above market level. While there is strong demand from brands that currently do not have a ground-level store in a prime retail area, the number of competing tenants has fallen since last year and the pace at which rents has been increasing has decelerated. Moreover, some properties are now struggling to secure a lease, whereas a few months ago, a replacement tenant would have been identified quickly. This trend is likely to continue, and may eventually lead to a fall in prime rents."
Osaka (Shinsaibashi, Umeda)
Prime store rents in Osaka in Q3 2016 (assumed achievable rent, including service charges) were flat year-on-year at JPY 300,000 per tsubo. In Shinsaibashi, drugstores continued to drive rents this quarter as foreign tourists, whose numbers are increasing, continued to spend money on pharmaceutical goods and cosmetics. In Umeda, where there has always been a relatively low concentration of ground-level stores, demand was focused on new properties in prime locations, with applications from over 30 companies seen in one case.
Tsuyoshi Hashikawa, senior director of CBRE's Kansai Retail Services team, commented, "Leasing demand from drugstores remained particularly buoyant in Shinsaibashi. Rents soared as drugstores competed for properties in prime locations, reaching levels beyond the financial feasibility of other sectors. With Shinsaibashi being well-known as the biggest and main shopping area of Kansai, and the number of tourists coming to this area likely to increase, drugstores are likely to continue driving the demand. With that being said, should drugstore demand weaken, it could cause prime rents to fall sharply."
Prime store rents in Nagoya in Q3 2016 (assumed achievable rent, including service charges) were flat at JPY 120,000 per tsubo for the eighth consecutive quarter. In Sakae, demand for flagship stores was strictly concentrated along the high streets, to the point where vacant sub-street properties with relatively large rental floor plates were overlooked.
Hideo Oue, senior director of CBRE's Nagoya Retail Services team, commented, "Sales grew on inbound tourist demand and drugstores, whose capacity to bear rents has increased dramatically. There were several cases where drugstore brands bid high prices for prime retail properties with relatively large floor plates. Despite this however, such demand has yet to increase top prime rents."
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