Land of the rising sun – Tokyo’s prime retail market

April 13, 2015 / By

Tokyo is the world’s largest metropolitan area and its main shopping districts – Ginza and Omotesando – are world-renowned. Although long established as a shopping mecca, the city has recently seen a resurgence in activity as retailers refocus strategies amid improving consumer sentiment and strong growth in tourist arrivals. As such, healthy retailer demand for prime locations has supported higher land values and rents. According to a recent government survey, Ginza reportedly has the highest commercial land prices (JPY 33.8 million per sqm or USD 280,000 per sqm) in Japan with growth last year reaching double digits, while rents in this district have now recovered to near pre-GFC levels.

Tokyo draws from not only a large affluent consumer base within the city – the highest number of millionaires in any city worldwide (WealthInsight) – but also from across Japan. With improved consumer confidence and the wealth effect of a rising stock market (+85% since Dec 2012) following the initiation of Abenomics, the personal luxury goods market in Japan witnessed a strong performance last year despite a sales tax hike in April 2014 which saw overall consumption falter.

High spending Japanese tourists have long been a boon for global tourism markets but recently the tourism industry in Japan has witnessed robust growth benefiting from a rise in regional travellers. Supportive government policies (e.g. visa relaxations), improved air connectivity and yen depreciation (-40% since Dec 2012) have helped foster growth. In 2014, visitor arrivals to Japan increased 29% to 13.4 million, with the top source markets being Taiwan, Korea and China. As a result, tourist spending topped JPY 2 trillion (USD 17 billion; +43% y-o-y) for the first time, with Chinese tourists accounting for more than one-fourth of total expenditures. In a bid to cater to this growing segment, the government expanded the list of tax exempt items and increased the number of tax-free shops to 9,400 (5,800 in 2013). Meanwhile, many retailers have started to tailor service offerings to tourists – e.g. deploying multi-lingual staff, offering free in-store wifi and airport delivery.

Figure 1: Visitor arrivals to Japan

Source: Japan National Tourist Organisation

With expectations for further gains in domestic consumption and tourist arrivals (government targeting 20 million visitors by 2020), and improvements in infrastructure in preparation for the 2020 Olympics, the outlook for Tokyo’s Prime retail market is bright. These factors alongside persisting retailer demand should support a further rise in rents and land values.


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