, Japan

Tokyo retail rents decline for seventh consecutive quarter

Rents slipped 1% y-o-y in 4Q21.

Tokyo retail rents are gradually stabilising, with a growth rate of 0.0% q-o-q and a decrease of 1.0% y-o-y in 4Q21. Rents amounted to JPY 73,234 per tsubo per month during the quarter. 

According to JLL, rents edged down for the seventh consecutive quarter with negative growth decelerating. Rents were stable in ground floor spaces in Ginza and Omotesando. Upper floor rents in Omotesando saw marginal decreases.

Here’s more from JLL:

Capital values registered growth for the second consecutive quarter in 4Q21, increasing by 0.5% q-o-q and decreasing 0.4% y-o-y. Cap rates were stable. Transactions confirmed in the quarter included Japan Metropolitan Fund’s portfolio disposition, including G-Bldg Ginza 01 for an undisclosed price and G-Bldg Minami-Aoyama 01 for JPY 10.1 billion.

New opening activity increases as retailers foresee post-COVID-19

The fourth state of emergency was finally lifted in October. Notwithstanding, consumer sentiment, which recovered to January 2020 levels in September, remained mostly stable through December. Department stores sales continued to increase y-o-y in November, in part reflecting growth of luxury goods sales, but it has yet to recover to 2019 levels.

Retailer demand for ground floor space with high visibility remained resilient in 4Q21. New openings in the quarter included Paul Smith in Ginza and Hublot in Omotesando. Both Armani Exchange and Puma opened flagship stores alongside Cat Street, a sub-street adjacent to the prime areas of Omotesando that connects with Shibuya.

New Ginza Sony Park due in 2024

The construction of New Ginza Sony Park (tentative project name) will start at the former site of Ginza Sony Park in May 2022. The retail-led building will offer five storeys above ground and GFA 4,300 sqm upon completion in 2024.

Ginza 5-chome Miyuki-dori Project (tentative project name) will commence construction at the corner site of the crossing of Harumi-dori and Namiki-dori in February 2022. The retail building with 12 storeys above ground will offer GFA 1,500 sqm to the market upon completion in 2023.

Outlook: Rents to bottom out; cap rates to remain stable

According to Oxford Economics, as of December 2021, private consumption was revised upwards to grow 2.9% in 2022. With the fourth round of the state of emergency finally lifted in October, consumption is expected to continue to pick-up as socioeconomic activities recover. Risks include COVID-19 infections and their negative impact on consumer footfall.

Ground floor rents are expected to remain resilient with demand underpinned by healthy sales of luxury goods as well as other apparel and leather goods sales as social restrictions are lifted and people start to venture out. Upper floor rents are expected to have bottomed out. In the investment market, capital values are expected to remain stable, largely reflecting stable cap rates.

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


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