Viewpoint

Japan ViewPoint - Landlord flexibility is the key amid remaining uncertainty

February 9, 2023

Against the backdrop of recovering sales, more retailers are seeking street-level store space in the major retail areas. However, continued uncertainty about the economic outlook has prompted most retailers to remain cautious towards lease conditions for potential new stores.
Should wage increases continue to fail to keep up with inflation caused by rising material prices and the weakening yen, this could have a dampening impact on spending. As such, retailers are somewhat conservative towards opening new stores on concerns that they may not be able to achieve their sales targets.
Against this background, landlords being more flexible on leasing conditions should support retailers who have been contemplating new store opening. According to an owner survey carried out by CBRE, the measure with the highest percentage of landlords implementing or considering implementing was the rent-free periods, at 63.1%.
Elsewhere, in terms of provisions to be included in the leasing contract, the most common consideration made is a shortening of the lease period (36.9%), implying that many retailers are looking to sign the shortest possible lease that will still allow them to recoup initial costs. Indeed, since the advent of the pandemic, a shorter lease term, such as five-year fixed-term leases with a no-cancellation period of three years, have become more common.