APPD Market Report Article


August 26, 2022

Takeshi Akagi, Head of Research, Japan


JPY 74,025


Retailer demand remains healthy

  • Department stores sales increased 81% y-o-y in May, in part due to increased operating hours, no travelling restrictions during holidays and robust demand for luxury goods. Compared with 2019, sales decreased by 9%. When excluding duty-free sales, sales only decreased by 0.9%.
  • Retailer demand for ground floor space with high visibility remained resilient in 2Q22. New openings this quarter included Akris opening a flagship store along Chuo-dori 4-chome and Breitling opening its flagship store along Omotesando. Chanel Beauty House opened in the neighbourhood of its boutique in the Omotesando area for a relatively short term.

Multiple redevelopments add to the pipeline in the fringe areas

  • The Ginza Museum Building and Ginza Nogakudo Building will be redeveloped jointly. Located along Sotobori-dori, the Ginza Museum Building Project (tentative name) will offer 11 floors with GFA 2,200 sqm upon completion, scheduled to be completed in 2023.
  • The Jingumae 3-chome Project (tentative name) will offer a three-storey above-ground retail building with GFA 520 sqm along Harajuku-dori in 2023.

Rents increase for the first time in nine quarters

  • Rents averaged JPY 74,025 per tsubo per month, at end-2Q22, increasing 1.1% q-o-q and 0.8% y-o-y. Rents increased for the first time in nine quarters, which reflected the increase in ground floor spaces in Ginza. Upper floor rents were stable in both Ginza and Omotesando.
  • Capital values registered growth for the fourth consecutive quarter in 2Q22, increasing by 1.1% q-o-q and 2.4% y-o-y. Cap rates were stable. Transactions confirmed in the quarter included A.D. Works acquiring the G Building Jingumae 02 from Japan Metropolitan Fund (J-REIT) for JPY 1.85 billion and an NOI cap rate of 3.0%.

Outlook: Rents to pick up; cap rates to remain stable

  • According to Oxford Economics as of June 2022, private consumption was revised upwards to grow 2.5% in 2022. Consumption is expected to pick up as socio-economic activities normalise. Risks include volatility of the equity markets and delays in relaxing immigration restrictions.
  • On the back of healthy consumption of luxury goods by local residents, as well as the return of foreign visitor arrivals as immigration restrictions ease, demand from various retailers is expected to remain resilient and underpin rent growth. 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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