Tokyo, May 11th, 2015 - CBRE released today its Q1 2015 Japan Retail MarketView covering retail property market trends in Tokyo and other major Japanese cities.
Hot Topics
- Japanese consumption expected to recover gradually, helped by an expected rise in real wages and supported by the wealth effect amid higher share prices
- Tokyo, Osaka and Nagoya all remain tight, with very little space available
- Overall rents are increasing but prime rental growth stalled after rapid rises in recent quarters
Tokyo (Ginza, Omotesando, Harajuku, Shinjuku, Shibuya)
Core retail submarkets in Tokyo continued to report robust demand in Q1 2015. With the weaker yen and increasing number of overseas visitors to Japan, foreign brands have been increasingly eager to open stores. Several retailers which have seen sales grow thanks to inbound consumption were observed to have paid relatively high rents for stores in secondary areas during the quarter. The supply/demand balance remained tight amid the buoyant demand, and rents are generally rising. However, rents in top-end prime locations stalled during the period after having risen by around 20% since the end of 2013. Prime rents (assumed achievable rents) in Q1 2015 were flat q-o-q at JPY 350,000 per tsubo.
Ginza saw strong demand for flagship stores from luxury, jewelry and watch brands which do not yet have a presence in the area. There was also relocation demand from retailers looking to upgrade their locations or secure larger floor space. In Omotesando, properties on prime streets received enquiries from multiple tenants, despite landlords asking for rents that are above recent market levels. In Shinjuku, it remained difficult for demand to be realized as most requirements for new stores are concentrated on prime streets, where there is little space available. During the quarter the refurbishment of Shibuya Parco was reported. This is expected to help absorb the buoyant demand in Shibuya, should the plans come to fruition.
"There continues to be remarkable growth in inbound consumption and some retailers opening shops in Ginza hope to increase monthly sales by as much as 30 to 40%," said Akihisa Sato, senior director of CBRE's Tokyo Retail Services team. "The number of retailers offering duty-free sales is increasing, especially in department stores, and inbound consumption is likely to increase further, thanks to the weaker yen and other factors. Some owners of properties on fixed-term leases whose tenants are approaching the end of their lease are looking for new tenants who will pay a higher rent in order to move negotiations on a new lease in their favor. There is still little space available in good locations and rental growth is likely to continue."
Osaka (Shinsaibashi, Umeda)
The quarter saw strong demand in Osaka's two core submarkets, Shinsaibashi and Umeda. In Shinsaibashi, which is dominated by standalone stores, major retailers continued to open some of their largest ever flagship stores in Japan. Large Japanese and overseas retailers are still pursuing aggressive store opening programs. In Umeda, where multi-tenant retail properties dominate, the period saw a succession of refurbishments and renovations. As such properties continue to be opened, the wave of retailers opening stores that are their first in Japan, or their first in the Kansai region, is likely to continue. Prime rents in Osaka were flat q-o-q in Q1 2015 at ¥200,000/month per tsubo (including CAM). Although retailers are keen to open stores, only a limited number of tenants are able to afford the higher rents, and most of these are luxury retailers. Consequently, prime rents have not risen visibly. However, they are likely to be on a moderate upward track, given the latent demand.
"During Q1 2015 retailers such as Burberry opened stores that are among their largest in Japan," said Tsuyoshi Hashikawa, senior director of CBRE's Kansai Retail Services team. "This reflects the continued focus on Japan by major Japanese and overseas retailers. Last year many retailers put store openings on hold to see what would happen to footfall after the consumption tax increase. However, since the start of 2015, an increasing number of retailers have become more willing to open stores. There is a limited supply of properties to absorb this demand, meaning that some retailers are looking further afield for store locations. Leasing activity in the Osaka retail market should therefore remain strong in the coming quarters.”
Nagoya (Sakae)
Demand remained robust in Nagoya's main sub-market of Sakae this quarter. However, only a limited number of new stores opened during the period, primarily due to tenants’ wait-and-see stance adopted in the aftermath of last year's consumption tax hike. Another factor is the lack of opportunity for store openings, given that there are no vacant store units available. However, retailer appetite for opening stores has strengthened since the start of 2015. This quarter saw retailers open stores both on prime streets and also in secondary areas. As this trend seems likely to grow, there should be an increasing number of new store openings over the course of this year.
"Demand has picked up this year and many retailers have moved out of wait-and-see mode," said Noriyuki Kawamoto, director of CBRE's Nagoya Retail Services team." Jewelry and luxury brands continue to focus on Otsu-Dori while apparel retailers are starting to look further afield for store locations, towards Isemachi-Dori or Princess-Odori. The market remains buoyant and the number of new store openings is likely to rise."
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