APPD Market Report Article


February 22, 2024

Takeshi Akagi, Head of Research, Japan


JPY 87,983


International retailers continue to seek space aggressively

  • The recovery of overall consumer sentiment stalled in November, although all subindices except income growth improved. Luxury good sales continued to grow, supported by healthy domestic consumption, which increased by 6.1% y-o-y in November, or 67.4% compared with the same month in 2019. Sales were, in part, supported by foreign visitor arrivals, which have recovered to 2019 levels.
  • Demand for prime retail space continued to come from major international luxury brands. Omotesando continued to see a number of new openings across the market, including Merrel alongside Meiji-dori, and Mackage alongside Miyuki-dori. Ginza saw Ya-Man open alongside the prime street.

Two buildings complete alongside Ginza Chuo-dori

  • Two buildings completed along prime streets in Ginza in 4Q23. Located in 3-chome of Ginza’s prime street, the 13-storey above-ground G3 building added 5,600 sqm (GFA) to Ginza Chuo-dori. Toraya Ginza Building, a 5,100 sqm (GFA) 12-storey above-ground building, completed in 7-chome. Luxury good retailers have committed to both; Rolex and Balenciaga will open in the respective ground floors.
  • In Omotesando, a couple of smaller-sized projects saw construction commence in the fringe area adjoining Shibuya, including Jingumae 2-chome Project with a GFA of 900 sqm due in 2024, and Shibuya 2-1 Project with a GFA of 600 sqm due in 2025. 

Capital values continue to grow, reflecting rent growth

  • Average rents in Tokyo’s Prime retail market reached JPY 87,983 per tsubo, per month, in 4Q23, increasing 3.1% q-o-q and 13.4% y-o-y. Rents continued to grow, albeit at a slower pace, driven by ground-floor rents. Both Ginza and Omotesando continued to renew record highs, commanding a monthly unit rent of JPY 300,000 and JPY 270,000, per tsubo, respectively.
  • Capital values also experienced healthy growth in 4Q23, increasing 3.4% q-o-q and 15.2% y-o-y. The increase was attributed to the healthy growth in rents, as cap rates remained stable. Notable transactions in the quarter included Rinnai’s acquisition of Forest Hills East and Forest Hills West in Omotesando. According to financial statements, the price was around JPY 25.8 billion.

Outlook: Capital values to grow, supported by rent growth

  • According to the economic outlook provided by Oxford Economics in December 2023, private consumption for 2024 was revised downward to 0.6%. Consumption is expected to continue to recover as employment and incomes improve. Risks include worsening consumer sentiment. 
  • With healthy consumption of luxury goods upon the full return of foreign visitor arrivals, international retailers are expected to continue to take up space aggressively. Meanwhile, new supply is commited for the near future. As such, we expect rents to be under upward pressure, and capital values to grow, reflecting rent growth, as investment yields should remain stable.

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

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