Tokyo retail rental growth slows for fourth consecutive quarter in Q1

But rents continued to rise for 12 straight quarters.

According to a JLL report, retail rents averaged JPY 99,660 per tsubo, per month in Q1 2025, increasing 1.0% q-o-q and 8.9% y-o-y. This marked the 12th consecutive quarter of increases, but the pace of increase slowed for the fourth consecutive quarter.

Capital values increased by 1.4% q-o-q and 10.8% y-o-y in Q1. Notable transactions in the quarter included Gaw Capital’s and Patience Capital Group’s joint acquisition of 91% and 9%, respectively, of Tokyu Plaza Ginza from Sumitomo Mitsui Trust Panasonic Finance.

Here’s more from JLL:

Total employee income gradually recovered, while consumer confidence remained mostly stable. The number of inbound tourists has continued to hit monthly record highs. Amid these circumstances, retail sales totalled JPY 12.7 trillion in January, increasing 4.4% y-o-y.

Demand for new store openings slowed in Q1 2025, as major luxury conglomerates are almost completed with their expansion strategies. Notable new openings included Brioni’s at Kirarito Ginza in February. Tiffany will open a new store alongside Ginza Chuo-dori in July.

Construction begins on retail buildings due in 2027-2028, including Hulic Aoyama Building redevelopment is due in 2028

Construction on the Hulic Aoyama Building redevelopment (tentative name) at the corner of the Omotesando and Aoyama Dori intersection is expected to start in April. The nine-storey building with a GFA of 9,700 sqm is due to be completed in 2028.

Outlook: Capital values to align with rent growth

In the Oxford Economics March forecasts, the 0.9% increase in private consumption in 2025 was a downward revision. Risks include trends in consumer confidence.

In the leasing market, rents are anticipated to continue increasing, albeit at a slower pace due to easing demand. In the investment market, capital values are expected to grow in tandem with rent growth as cap rates are projected to remain stable.