APPD Market Report Article


December 1, 2021


JPY 73,234


Demand remains resilient; no vacancy increases in ground floors

  • On the back of the state of emergency declared for the fourth time in Tokyo in early July, consumer confidence deteriorated for the first time in three months in August. Department store sales increased for the fifth consecutive month but remained below 2019 levels. Luxury goods sales continued to grow, while home electronics sales might have peaked.
  • Retailer demand for ground floor space with high visibility remained resilient, while demand for upper floor spaces was consistently weak in 3Q21. Hugo Boss opened in Tokyu Plaza Ginza in the quarter and Vacheron Constantin will relocate to Harumi-dori in 4Q21.

G3 project alongside Chuo-dori due for completion in 2023

  • The construction of G3 Project will start at a location alongside Chuo-dori in December 2021. Located next to Chanel boutique, the former building had commanded one of the highest rent levels. The retail-led building will offer 13 storeys above ground with a GFA of 5,600 sqm upon completion in 2023.
  • The proposal for Shibuya 2-chome West District, a national strategic plan, has been announced. Comprised of three blocks with a total GFA of 322,000 sqm, retail space will be offered in Block A with GFA of 4,200 sqm, and Block B, an office-led mixed-use super-high-rise building with a GFA of 255,000 sqm. The buildings are due for completion in 2025–2029.

Rents continue to decrease albeit at a slower pace

  • Rents averaged JPY 73,234 per tsubo per month, at end-3Q21, decreasing by 0.4% q-o-q and 1.1% y-o-y. Rents decreased for the sixth consecutive quarter with negative growth decelerating. The quarter’s rent change was driven by declines in upper floors of the Ginza. Ground floor rents were stable.
  • Capital values growth turned positive for the first time in two quarters in 3Q21, increasing by 0.1% q-o-q and decreasing 2.1% y-o-y. Cap rates were stable. Transactions confirmed in the quarter included FPG’s series of acquisition including FPG links Jinnan, FPG links Omotesando III and FPG links Ginza Corridor. The prices were not disclosed.

Outlook: Upper floor rents to fall; cap rates to remain stable

  • According to Oxford Economics, as of September 2021, nominal private consumption growth had been revised downwards to 1.4% in 2021, followed by 2.6% in 2022. With the fourth state of emergency lifted in October, consumption is expected to pick up as socioeconomic activities resume on the back of preventative measures. Risks include COVID-19 infections and their negative impact on footfall.
  • Ground floor rents are expected to remain resilient with healthy demand on the back of steady luxury goods sales. Upper floor rents are expected to have bottomed as new demand arises from beauty services and medical clinics. In the investment market, capital values are expected to come under downward pressure reflecting the rent decline. Cap rates are expected to remain stable.

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

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