CBRE publishes report on Q2 2014 retail market trends
CBRE publishes report on Q2 2014 retail market trends
July 29, 2014
Demand for retail space remains healthy; rents continue to rise
CBRE released today its Q2 2014 report on retail property market trends in Tokyo and other major Japanese cities.
The negative impact of the consumption tax increase is fading quickly
More retailers are expected to focus on attracting the rapidly growing number of foreign tourists
Space in prime locations remains scarce
Rents are likely to continue to rise in Tokyo and all major markets
Tokyo (Ginza, Omotesando, Harajuku, Shinjuku, Shibuya)
Core retail precincts in Tokyo continued to witness robust demand this quarter. Space along prime streets is the subject of particularly strong demand and options are scarce. When space does become available, multiple tenants compete for it and leases are signed very quickly. Some areas have already reported a significant rise in rents over the past year. Overall rents are expected to continue to increase in the coming quarters.
In Ginza, an increasing number of leases are being agreed to at rents higher than the levels seen before the onset of the global financial crisis in Q3 2008. Work is progressing on several new development projects. Multiple tenants have expressed an interest in the new space, even in those not due for completion for at least a year.
In Omotesando, the quarter saw the opening of several new high profile large and flagship stores such as the Apple Store Omotesando. Well-located properties continue to see strong enquiries and are likely to be let at the high-end of the rental range to well-funded tenants. In Shinjuku, Tiffany & Co. and Coach both announced plans to open stores this autumn. Tiffany's boutique will be its first in Shinjuku while Coach's flagship store will be its fifth in Tokyo. Following Louis Vuitton’s opening of a store in November 2013, Shinjuku has seen a succession of new openings by luxury brands.
"Tenants, especially foreign brands, are still keen to open stores, and supply remains tight," said Shina Fukui, director of CBRE's Tokyo Retail Services team. “As it is particularly difficult to find space in prime areas, retailers are continuing to broaden their focus to side streets. With the number of foreign tourists rising rapidly, we expect to see a further increase of foreign retailers wanting to open stores in Tokyo as a gateway to the rest of Asia."
Osaka (Shinsaibashi, Umeda)
Supply remains tight in core retail precincts of Osaka but there are still plenty of retailers keen to open new stores. In the Shinsaibashi area, a number of high profile tenants have opened Japan flagship stores or their first store in the Kansai region. The Umeda area is also attracting retailers, selecting Osaka as the site of their first store in Japan. The city’s consumers have a reputation for demanding high standards of price and quality, and retailers appear to be tapping into this trend as part of their overall marketing strategy for Japan. However, there is a chronic imbalance between supply and demand, and it is therefore likely to continue to be difficult for retailers to enter this market.
"There will be new supply in both Umeda and Shinsaibashi during the course of 2014, but this will not provide a solution to the lack of supply, as tenants have already been secured for this new space," said Tsuyoshi Hashikawa, senior director of CBRE's Kansai Retail Services team. "In fact, as new stores' popularity with customers draws more foot traffic to these areas, tenant demand is likely to increase further. Although several new developments are due to be completed in 2015 and beyond, the supply/demand imbalance will not be visibly affected. Supply will remain tight on prime central streets where there is strong tenant demand."
Demand from retailers, especially from those in the apparel sector, remains strong in the Sakae area, which forms the core of the Nagoya retail market. A number of foreign retailers have been searching for store locations for some time, albeit without success. With no stand-alone stores available to absorb this demand, some retailers have widened their search to suburban shopping centres. Several major new developments are scheduled to be completed around Nagoya Station between the fall of 2015 and 2017. However, for the time being there is unlikely to be any change in demand for stores in Sakae and it will take time to resolve the tight supply in the area. PARCO's new Nagoya Zero Gate development, which is due to open on Otsu-dori street in fall 2014, has received strong inquiries from tenants and appears to have already been fully let. A number of popular retailers will open stores within this new area, which is expected to reinvigorate Sakae's retail market when it is completed.
"Space is insufficient to meet the current strength of demand," said Noriyuki Kawamoto, director of CBRE's Nagoya Retail Services team. "Many major retailers, both domestic and foreign, have been searching for space for some time. Some have given up trying to find a standalone store and are now considering opening stores in suburban shopping malls. The dearth of major brands opening stores this quarter perhaps reflects this situation."
About CBRE Group, Inc.
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.