Tokyo, August 8, 2016 - CBRE today released its Q2 2016 Japan Retail MarketView covering retail market trends in Japan’s three major cities: Tokyo, Osaka, and Nagoya.
The number of inbound tourists continued to increase. 2016 year to June was up 28.2% y-o-y to 11.7mn.
Osaka prime retail rents surged 25% from JPY 240,000 per tsubo in Q1 2016 to JPY 300,000 in Q2 2016 due to increased demand from drugstores
Retail leasing demand in Japan’s three major cities was driven by drugstores, sportswear and cosmetics brands, and other tenants that are also experiencing higher sales thanks to inbound tourist demand. Meanwhile, demand from luxury brands slowed.
Tokyo (Ginza, Omotesando, Harajuku, Shinjuku, Shibuya)
Tokyo prime rents (assumed achievable rents) were flat q-o-q at JPY 400,000 per tsubo in Q2 2016, remaining unchanged for the fourth consecutive quarter. Some well-located properties in Ginza attracted bids from several retailers despite having above-market asking rents. That said, prime rents in this area is seeing little upward momentum. Omotesando/Harajuku was again the focus for demand from tenants seeking to benefit from the area's trend-setting status. Shinjuku enjoyed demand from a wide range of retailers, from luxury brands to second-hand stores. In Shibuya, the shortage of well-located spaces meant that most of the tenants leaving Parco, a department store which will temporarily close this summer, did not secure a new space.
"Demand for luxury brands has weakened, particularly in Ginza," said Akihisa Sato, senior director of CBRE's Retail Services team. "This has mainly been driven by changing shopping tastes among foreign tourists, who have become less interested in purchasing luxury items and more interested in everyday items. Consequently, a number of luxury retailers have seen a fall in the number of foreign tourists visiting their stores and have consequently suffered a y-o-y drop in duty-free sales. Some of these retailers have put their store-opening programs on hold. Unless there are signs of a recovery in demand for luxury goods, prime rents are unlikely to make further headway."
Osaka (Shinsaibashi, Umeda)
Osaka prime rents (assumed achievable rents) rose 25% q-o-q to JPY 300,000 per tsubo (including CAM) in Q2 2016, due to further growth in demand from drugstores. In Shinsaibashi, which is the city’s main area for tourist shopping, drugstores stepped up their effort to take advantage of inbound demand. In Umeda, while retail properties around the stations have registered increased footfall, some properties farther from the stations are struggling to attract tenants because of low footfall.
"Demand from drugstores has strengthened further, thanks to buoyant sales, especially in Shinsaibashi," said Tsuyoshi Hashikawa, senior director of CBRE's Kansai Retail Services team. "This quarter, a number of properties in good locations with above-market asking rents received bids from several competing drugstores offering around 1.5 times the asking rent. However, since drugstores are the only sector driving rents higher, prime rents could drop sharply if the demand from drugstores falls."
Nagoya prime rents (assumed achievable rents) were flat q-o-q at JPY 120,000 per tsubo in Q2 2016, remaining unchanged for the seventh consecutive quarter. In Sakae, there is strong demand from retailers that do not yet have standalone stores in the area. However, larger properties with bigger floorspace and correspondingly, higher overall rent, are attracting only a limited number of enquiries from tenants.
"The growth in inbound demand has tailed off," said Hideo Oue, senior director of CBRE's Nagoya Retail Services team. "At department stores that have attracted concessions from general tax-free retailers and large home electronics discounters, inbound demand has not contributed as much to overall sales as expected. Department stores' sales of luxury goods also fell y-o-y. If this continues, it might have an effect on prime rents."
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