Why Tokyo’s retail property market is still mired in uncertainty

The slight increase in rents was only due to listings of previously unavailable prime locations.

Tokyo’s retail market has continued to suffer from the dragging pandemic up until the second half of 2021. As reported by the semiannual survey by the Japan Real Estate Institute (JREI) and BAC Urban Projects, average asking 1F rents in Tokyo have slipped 4.0% year-on-year (YoY), although they have also increased 1.5% half-year-on-half-year (HoH). 

At the same time, Savills says non-1F rents have seen a similar trend, seeing an annual decline of 6.2% YoY while also increasing this half-year by 2.1% HoH. 

According to Savills, “While the increments in rents from the previous half-year might raise hopes of a recovery, the reality of the situation is that the listings of previously unavailable prime locations are boosting average rents. As such, market fundamentals have not improved, and uncertainty remains in the retail sector.”

Here’s more from Savills:

Some industries within retail have clearly suffered disproportionately throughout the pandemic, and F&B is one such industry. With its wafer-thin profit margins and very high break-even points, the sharp decline in sales has unsurprisingly left many restaurants in the red, and some have been forced to close. F&B outlets are ubiquitous and hold strategic importance for occupying mid-to-high floors in many retail establishments. 

As such, F&B’s downturn continues to negatively affect a large number of retail properties. Nonetheless, the increased vaccination rates and the end of the nationwide state of emergency should bring foot traffic back to retail areas and put the sector on the road to recovery.

Read the full report here.