- Average 1F rents in Tokyo increased by 3.0% half-year-on-half-year (HoH). Prime retail streets have been performing well, and vacancies are few and far between in such areas.
- In regional markets, average 1F asking rents decreased by 6.5% over the past half-year. Regional submarkets that are popular with inbound tourists have generally enjoyed strong performance and tight vacancies.
- Japan's retail market has experienced significant growth in terms of department store and duty-free sales, driven by a steady rise in inbound tourism, record tourist spending, and robust domestic demand at the higher end.
- Luxury brands have continued to perform well amid elevated inbound spending, although global headwinds from US tariffs may dampen spending, and inhibit some further store openings moving forward.
- Japan’s pop culture related stores, including unique character goods and animation are also performing well and keep attracting both domestic and inbound tourists.
- Sustained wage growth should support further retail sales growth.
- Although marginally lower than in 2023, investment volumes in the retail sector throughout 2024 have been elevated, with 2025 also getting off to a positive start.
- Suburban retail facilities have seen heightened interest among investors, particularly due to their stable revenue streams and vast potential for strategic asset management.
Firm retail market performance, particularly in inbound tourism hotspots
Japan’s retail sector continues its positive performance into 2025. Strong demand has been witnessed for store openings along premier streets in Tokyo and across regional markets, and availabilities are currently extremely low in such locations. Inbound tourism has gone from strength to strength, and elevated inbound spending should further buoy retail sectors moving forward, although performance may largely depend on respective submarkets’ ability to attract inbound visitors. In the meantime, strong wage growth should bode well for domestic consumption.
Savills Research & Consultancy