Viewpoint
Japan ViewPoint - Closing Doors Amid the Pandemic June 2021
June 11, 2021
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- According to CBRE’s surveys, a total of 243 stores in Tokyo’s high street and secondary areas (Ginza, Omotesando, Harajuku) and Osaka (Shinsaibashi)* closed their doors in the 2020 calendar year, representing a 67.6% increase on the equivalent figure from 2018, and a 44.6% increase from 2019. This dramatic increase in store closures can be largely attributed to the ongoing COVID-19 pandemic. *Streets and areas determined by CBRE based on analysis of multiple factors including retail turnover, rent levels, and demand for store space.
- Q2 2020, in particular, saw three times as many closures as were seen in the equivalent periods of the previous two years. Q3 2020 and Q4 2020 saw twice as many closures over the period as were observed in 2018, and 1.6 times the number from 2019. This dramatic increase in store closures can be largely attributed to the ongoing COVID-19 pandemic. Reductions in consumer and commercial activity to prevent the spread of COVID-19 have left the majority of retailers with significantly lower sales and profits.
- Store closure trends differ significantly by geographic area. Annual store closures for 2020 in the Omotesando, Harajuku and Shinsaibashi areas increased over the previous two years. While closures in the Omotesando area only increased marginally, significant increases were noted in Harajuku and Shinsaibashi. Harajuku saw a 70% increase in store closures over the figures for the past two years, while closures in Shinsaibashi were up 140% from 2018 and 90% from 2019. In contrast, Ginza saw fewer closures in 2020 than in 2019. The reason for these differences in the number of store closures by area is believed to be primarily due to the different purposes served by street-level stores in each area.
- When divided by floor space, smaller stores of less than 50 tsubo in area accounted for the majority of store closures in 2020 in all areas. Closures of these smaller premises in 2020 in the Omotesando, Harajuku and Shinsaibashi areas showed an increase over the previous two years. The primary characteristics of the smaller-than-50-tsubo stores which closed in 2020 are ① retailers without a global presence, ② retailers with few brick-and-mortar stores, and ③ retailers with a limited business scale.
- Divided by retail type, the majority of store closures in 2020 in all areas were in the fashion industry. Closures of fashion brand stores in 2020 in the Harajuku and Shinsaibashi areas demonstrated a significant increase over the previous two years. 36% of fashion store closures in the Harajuku area were on Takeshita-dori, with a further 31% on Cat Street. The Shinsaibashi-suji shopping district led the way in terms of the street with the most fashion store closures, accounting for 56% of closures in the area.
- CBRE has identified three key leasing strategies for landlords to consider adopting under the pandemic: The first is the implementation of rent level adjustments (including temporary measures) or subdivision of properties into smaller units in order to keep rents manageable. The second key strategy is for landlords to target companies and industries that have been performing well during the pandemic. The third and final strategy that may be effectively employed by landlords is the broadening of the range of tenant industries they are willing to consider. The implementation of these policies has allowed more landlords to secure new tenants this year.