Tokyo prime retail rents rise by 16.1% in Q2

Ground floor rents continued to significantly increase in Ginza and Omotesando.

According to a JLL report, average rents in Tokyo’s prime retail market reached JPY 94,683 per tsubo, per month in Q2 2024, increasing 3.4% q-o-q and 16.1% y-o-y. Rent growth decelerated, but ground-floor rents continued to renew record highs in both Ginza and Omotesando.

“Capital values continued to grow in Q2 2024, up 4.3% q-o-q and 19.2% y-o-y. The increase reflected healthy growth in rents as cap rates remained stable. Notable transactions in the quarter included Union Investment Real Estate’s sale of J6 Front,” the report said.

Here’s more from JLL:

The assessment of consumer confidence in June was unchanged at “improvement has stalled,” as the index recovered for the first time in three months. However, luxury goods sales at department stores in Tokyo continued to register strong growth.

Demand for prime retail space continued to come from major international luxury brands in Q2 2024. Notable new openings in Q2 2024 included Boucheron in Omotesando Hills and Jo Malone London and Zenith at the Tokyu Plaza Harajuku-Harakado.

Tokyu Plaza Harajuku-Harakado opens in Omotesando

At the intersection of Omotesando and Meiji-dori, Tokyu Plaza Harajuku-Harakado opened in April. With ground-floor retailers including the aforementioned, the facility offers nine storeys above ground and prime retail space of GFA 20,000 sqm.

On the prime street of Ginza Chuo-dori, Ginza 8-chome 9-11, 12 Project is scheduled to break ground in October 2024. It will be a retail building with 14 storeys above ground and offer a GFA of 5,600 sqm of prime space in December 2026.

Outlook: Capital values to grow, albeit slowly, reflecting rent growth

In Oxford Economics’ June 2024 outlook, private consumption in 2024 was revised downwards to -0.2%, reflecting the recovery from the one-off impact of auto production and the decreasing strain from cost-push inflation in the latter half of the year.

In the leasing market, rents are expected to grow, albeit at a slower pace, driven by demand from international retailers. In the investment market, capital values are expected to continue to grow slowly, reflecting rent growth.

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