APPD Market Report Article


May 31, 2022


JPY 73,233


Healthy luxury goods consumption underpins new opening activity

  • Consumer sentiment deteriorated for the third consecutive month in February, to levels equivalent to May 2021. Department store sales increased 5.1% y-o-y in February for the sixth consecutive month, in part reflecting continued strong growth of luxury goods sales; however, it is still below 2020 levels. Under the circumstances, COVID-19 prevention measures were finally lifted in March.
  • Retailer demand for ground floor space with high visibility remained resilient in 1Q22. New openings this quarter include Pandora relocating its flagship store to Omotesando due to redevelopment of its former building. Valentino Beauty moved its flagship store from an adjacent building to Omotesando Hills West. Adidas relocated to the former American Eagle site in Tokyu Plaza Omotesando Harajuku.

Multiple redevelopments add to the pipeline in Ginza Chuo-dori

  • Saegusa Building, where the Apple Store Ginza is currently located, will be redeveloped. Located on a corner lot of Ginza 3-chome alongside Chuo-dori, the 10-storey above-ground building with GFA 4,000 sqm is due for completion in 2024.
  • The Ginza Core Building redevelopment project has been announced. Located in Ginza 4-chome alongside Chuo-dori, the 12-storey above-ground retail building with GFA 20,000 sqm is due for completion in 2027.

Rental decline continues to decelerate

  • Rents averaged JPY 73,233 per tsubo per month at end-1Q22, virtually stable with a growth rate of -0.0% q-o-q and y-o-y. Rents edged down for the eighth consecutive quarter with negative growth decelerating further. Rents were stable in ground floor spaces in Ginza and Omotesando. Upper floor rents in Omotesando continued to see marginal decreases.
  • Capital values registered growth for the third consecutive quarter in 1Q22, increasing by 0.7% q-o-q and 0.3% y-o-y. Cap rates were stable. Transactions confirmed in the quarter included the Ginza Core Builidng (co-ownership) – the building is located alongside Ginza 4-chome Chuo-dori to be redeveloped by Hulic.

Outlook: Rents to bottom out; cap rates to remain stable

  • According to Oxford Economics as of March 2022, private consumption was revised downwards to grow only 1.3% in 2022. With COVID-19 prevention measures finally lifted in March, consumption is expected to continue to pick up as socioeconomic activities recover. Risks include deteriorating consumer sentiment.
  • With little room for further decline, ground floor rents are expected to remain resilient with demand underpinned by healthy consumption of luxury goods as well as other apparel and leather goods by local residents. In the investment market, capital values are expected to remain stable, largely reflecting stable cap rates.

Note: Tokyo Retail refers to Tokyo's prime retail markets of Ginza and Omotesando.

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