CBRE Publishes Report on Q4 2015 Retail Market Trends
CBRE Publishes Report on Q4 2015 Retail Market Trends
February 9, 2016
Strong Momentum for Secondary Rents, but Prime Rents Flat q-o-q
Tokyo, February 9, 2015 - CBRE today released its Q4 2015 Japan Retail MarketView covering retail property market trends in Tokyo and other major Japanese cities.
The number of foreign tourists visiting Japan rose by 47% y-o-y to 19.73 million in 2015. Travel spending by foreign tourists was up 71.5% y-o-y to a record JPY 3.477 billion.
Demand for standalone stores in Q4 2015 was again led by luxury goods, drug stores, and other retailers, all of which have been enjoying increased sales thanks to the growth of inbound demand.
Prime retail rents were flat q-o-q in all areas this quarter. However, the retail market is likely to remain tight, as there is room for further growth in inbound tourists in the medium to long term. As such, there is also room for rents to rise further.
Tokyo (Ginza, Omotesando, Harajuku, Shinjuku, Shibuya)
Q4 2015 saw strong demand in Tokyo's main retail submarkets from retailers enjoying an uplift in sales thanks to the growth of inbound demand. With few spaces available in prime locations, the supply/demand balance remained tight. Luxury and sports brands were very keen to open stores in Ginza, and rents rose in secondary areas within the district. In Omotesando, several new store openings generated significant publicity, while a number of pop-up stores opened to take advantage of the area's status as a trendsetting location. In Shinjuku, where vacant units are even more scarce than in other areas, demand for new stores focused on newly built properties. In Shibuya, while many retailers are taking a wait-and-see stance with respect to the impact of the redevelopment of the area around the station, there is still demand from fast fashion and associated brands, casual clothing, and sports brands that have been considering opening a store for some time.
Tokyo prime rents (assumed achievable rents) were flat q-o-q at JPY 400,000 per tsubo in Q4 2015. Although several new stores were announced by luxury brands, mostly in the main areas of Ginza, prime rents, which are already more than 30% above Q1 2014 levels, seem to have leveled off for the moment.
"The number of foreign tourists visiting Japan in December rose by 43.2% y-o-y to a December record, while the number of Chinese tourists rose at an accelerating rate, up 82.7% y-o-y after a 75.0% rise in November," said Akihisa Sato, senior director of CBRE's Tokyo Retail Services team. "For retailers who have had successful branding strategies in China and elsewhere in Asia, duty-free sales have become a larger proportion of their overall sales over the past year. An increasing number of retailers will try to improve their brand recognition throughout Asia in order to win over customers before they come to Japan. The success or failure of their inbound strategy is likely to affect some retailers' store opening programs."
Osaka (Shinsaibashi, Umeda)
Osaka prime rents (assumed achievable rents) were flat q-o-q at JPY 240,000 per tsubo in Q4 2015. In a number of cases, chiefly in newly built properties, new tenants have been found at rents above the previous market rate. However, prime rents have already risen by 20% over the past year, and there were no leases signed this quarter that pushed these higher. In Shinsaibashi, demand from luxury brands to open new stores rose, thanks to spending by domestic high net-worth consumers and the growth of inbound demand. A lot of brands with existing stores in Shinsaibashi were keen to move to areas that are popular with foreign tourists. Similarly, a number of retailers in Umeda relocated in order to improve their location. This appears to be because of a change in footfall patterns due to a series of new or refurbished department stores and retail malls opening around Umeda Station.
"In Shinsaibashi, the number of new stores primarily selling designer menswear has been increasing since around 2014," said Tsuyoshi Hashikawa, senior director of CBRE's Kansai Retail Services team. "There is solid demand from luxury brands, but it is likely to take time for them to find units because there are so few available in prime locations. Retailers are still trying hard to capture inbound demand. For example, the Daimaru South Building is becoming all duty-free. With the supply/demand balance tight, rents could rise further."
In Nagoya's main retail sub-markets, there is so little space available, especially in the prime areas, that some tenants have looked further afield for possible locations for stores, including less fashionable areas. Many retailers that limited their search to prime locations, such as Otsu Dori, did not manage to find space. Drug stores, which have become able to pay much higher rents because of growing duty-free sales, have started looking for locations in prime, rather than secondary, areas. Nagoya prime rents (assumed achievable rents) were flat q-o-q at JPY 120,000 per tsubo in Q4 2015. While there is strong demand from a wide variety of retailers, most are also conscious of their profitability, which somewhat limits the upside for rents.
"Inbound demand continues to grow," commented Hideo Oue, senior director of CBRE's Nagoya Retail Services team. "It is becoming an established routine for foreign tourists' tour buses to stop in front of Oasis 21, leaving them to shop first on Nishiki Dori, then on Otsu Dori before heading towards Yabacho. One reason for the growth in foreign tourists is the increase in the number of low-cost airline flights between Chubu International Airport and China since last September. Improved access to the Sakae area and the growing number of duty-free stores promises further growth in inbound demand."
For further details please refer to the Q4 2015 Japan Retail MarketView. The MarketView will be available on the CBRE website at www.cbre.com.
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