APPD Market Report Article


November 28, 2022

Takeshi Akagi, Head of Research, Japan


JPY 75,212


Sale of luxury goods continue to outperform 2019 levels

  • Department store sales increased 38% y-o-y in August, the 12th consecutive month of increase. Luxury goods continued to record strong sales, outperforming 2019 levels since March. This reflected strong domestic consumption as the number of foreign visitor arrivals continued to be constrained due to immigration restrictions.
  • Demand for ground floor space with high visibility was healthy in 3Q22. New openings in the quarter included Chanel Fine Jewelry, which opened on Namiki-dori in Ginza. Marc Jacobs opened its first flagship store on Omotesando, while Ray-Ban did so on Cat Street.

Moderate supply scheduled in prime areas

  • Alongside Chuo-dori 3-chome in Ginza, the GS project has started construction. The redevelopment of the Saegusa Building Main Tower will offer a ten-storey above-ground retail-led building with 4,000 sqm (GFA) upon scheduled completion in 2024. Apple, which occupied the former building, have started operating at Hulic & New Ginza 8 due to the refurbishment.
  • Construction has started at the tentatively-named Omotesando 3919 Project. Located within the Omotesando area (3 Kita-Aoyama Minato-ku), it is a retail-led, three-storey building above ground, recording a GFA of 240 sqm, and is scheduled for completion in December 2022.

Rents and capital values continue to increase

  • Rents averaged JPY 75,212 per tsubo per month at end-3Q22, increasing 1.6% q-o-q and 2.7% y-o-y. Rents increased for the second consecutive quarter, due to rent increases in ground floor spaces in both Ginza and Omotesando.
  • Capital values increased for the fifth consecutive quarter, by 2.3% q-o-q and 4.6% y-o-y, showing accelerated growth for the second consecutive quarter. Transactions in 3Q22 included Hulic’s acquisition of a portion of Ginza Core on Ginza Chuo-dori (co-ownership), and the Development Bank of Japan’s and Kintetsu Real Estate’s Minami-Aoyama 511 Building in Omotesando.

Outlook: Rents to continue picking up; cap rates to remain stable

  • According to Oxford Economics as of September 2022, private consumption was revised upwards to grow by 2.9% in 2022 and 1.0% in 2023. Private consumption is expected to hold firm. Risks include the impact of inflation on disposable income.
  • On the back of healthy sales supported by domestic consumption, as well as the return of foreign visitor arrivals as immigration restrictions ease, demand from various retailers is expected to remain resilient and underpin rental growth for the foreseeable future. In the investment market, capital values are expected to rise in tandem with rental growth.

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

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