- Tokyo’s average 1F retail rents are trending upwards, with strong growth in Ginza and Shinjuku this period.
- New retail developments abound, which could give rise to new prime markets in Tokyo and beyond.
- The number of Korean visitors has dropped significantly following the onset of the Japan-Korea dispute. Despite this, inbound spending in Japan is up 9.1% YoY for Q3 and 8.2% year to date (YTD), indicating that the impact on the retail sector should be limited.
- With limited opportunities to buy prime Tokyo retail, and available assets proving somewhat pricey for many investors, retail transaction volumes have declined substantially over the prior year. On the other hand, Osaka investment volumes YTD to Q3 are already 64% higher than 2018, and other regional markets have seen volumes pick up.
- The impact of e-commerce remains somewhat limited compared to global peers. However, growth in the sector has been stronger than expected and traditional bricks and mortar retailers are restructuring to remain competitive.
Retail rents rise in Tokyo
TOKYO SUBMARKET RENTS
According to a semi-annual survey by Japan Real Estate Institute (JREI) and BAC Urban Projects, most of Tokyo’s prime retail submarkets saw rental growth in 1H/2019. Average 1F rents grew 9.5% half-year-on-halfyear (HoH) and 8.8% year-on-year (YoY), with HoH growth largely led by Ginza’s recovery from last period. Non-1F rents, which are more stable, posted even stronger growth of 10.1% YoY, probably backed by a favourable leasing market across all real estate sectors, especially office. Indeed, all submarkets saw YoY growth in non-1F rents. Ginza and Omotesando still maintain the top spots in 1F rents, though average non-1F rents are nearly level across Tokyo’s prime submarkets, with Shibuya and Shinjuku making substantial gains over the prior year.