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Shibuya Crossing Tokyo Japan

1 December 2014

Japan’s retail market is booming, with international brands and local owners all enjoying the sweet taste of success in 2014. However, could recent economic troubles mean its time to shut up shop? Cityscape investigates.

Abenomics – the economic policies advocated by Shinzo Abe, the Prime Minister of Japan – have certainly revived confidence in Japan’s real estate investment market, with the retail sector looking particularly healthy in 2014.

However, while the country teeters on the brink of recession, many might now be asking if it’s time to check out and cash in.

The past few years have seen Japan enjoy relative economic growth, alongside improved market confidence, and an upswing in tourist numbers. All have had a very positive effect on the retail property market.

Japan has experienced a 67% increase in overseas visitors since 2011, with 2013 totalling 10 million international tourists – up 24% on 2012. Factors influencing this trend include the depreciation of the Japanese yen after Prime Minister Abe and the Bank of Japan announced their assertive quantitative easing programme in early 2013.

With tourists come shoppers – and it is little surprise that as the number of tourists has increased so too has the retail real estate market. Luxury European brands are infiltrating the market, taking high-end High Street locations, while numerous large retail developments are underway.

According to Savills’ Spotlight – Japan Retail Market report, published earlier this year, key High Street retail destinations and suburban shopping centres have flourished as Japan continues to urbanise, with its population gravitating towards its large cities and suburban conurbations.


Large-scale retailers have seen robust sales figures, with supermarkets, department stores and convenience stores all reporting year-on-year growth in 2013. Especially high sales figures were seen from luxury goods retailers, cosmetics products and household appliances in early 2014. However, this was greatly influenced by front-loaded demand prior to the national sales tax increase that came into effect on 1 April 2014. The rise saw tax on goods increase from 5% to 8%, and resulted in a predicted dampening of sales figures.

According to the Japan Department Stores Association (JDSA), nationwide department store sales rose 10.4% y-o-y in Q1 2014, driven by a 25.4% jump in sales in March alone.

Post tax hike, Savills said it expected forthcoming data to show a dip in retail sales in Q2. By retail subsector, initial figures for April showed that sales fell 10.5% y-o-y at department stores and 3.9% y-o-y at supermarkets. However, Savills went on to predict that the negative impact of April’s tax increase on consumer demand would be moderate through the second half of the year.

According to Colliers International’s Japan Investment Outlook for Q4 2014, high-end retail space is benefiting from a stronger economy. Although retail sales, including department store sales, in April suffered a -4.3% and -10.5% y-o-y decline respectively, their recovery was well underway with 0.5% and -0.6% growth in July. A 30% y-o-y increase of foreign visitors, primarily from Asian countries, was a major contributing factor.


Japan may well be an archipelago of more than 6,800 islands, yet location is still an all-important market commodity. The four largest islands of Japan are Honshu, Hokkaido, Kyushu and Shikoku, which together make up 97% of Japan’s landmass. The country has the world’s tenth-largest population with more than 126 million people, while Honshu’s Greater Tokyo Area is the largest metropolitan area in the world, with more than 30 million residents, meaning a potential 30 million shoppers.

Unsurprisingly, Tokyo is considered a key entry point for international retailers seeking to expand their brands in Japan or take a foothold in Asia. In early June, the new Apple Store in Omotesando opened for business. The 1,868-sqm store is the eighth for Apple in Japan, and the third in Tokyo.

New supply has included the 16,582-sqm Kirarito Ginza in Ginza-itchome, which opened on October 30, 2014 comprising over 50 stores, including the first flagship store for bag retailer Hartmann, and a re-launch for luggage retailer Samsonite. Meanwhile, Tokyo Land’s Ginza-gochome Project is scheduled to complete in autumn 2015, adding 49,700 sqm of new floor space in the area.

The Ginza or Omotesando districts are preferred by international retailers keen to make their presence felt in the competitive Tokyo market. From here, expansion is possible into other leading cities, such as Osaka and Nagoya.

Retail competition is fierce and there are virtually zero vacancies in Tokyo’s main retail thoroughfares, according to Savills’ Spotlight report. As such, asking rents in major retail districts run at a premium

According to data from Attractors Lab and BAC Urban Projects, published in spring 2014, the most expensive prime retail streets in Tokyo are located in Ginza, on Chuo-dori and Harumi-dori. Monthly asking rents for ground floor units here are in excess of JPY 150,000 per tsubo[1] (USD 385 per sqm).

In the Omotesando-Harajuku district, which hosts a cluster of luxury and high-street fashion brands, ground floor units along Omotesando-dori also command monthly asking rents of JPY 150,000 per tsubo (USD 385 per sqm).

In Osaka, monthly asking rents in one of the busiest pedestrian areas, Shinsaibashisuji-shotengai shopping arcade, range from JPY 60,000 to JPY 100,000 per tsubo (USD 155 to USD 255 per sqm) for ground floor units. Along nearby Mido-suji Street, where many luxury retailers have opened flagship stores, monthly asking rents range between JPY 60,000 and JPY 80,000 per tsubo (USD 155 to USD 205 per sqm).

In the city of Fukuoka, competition between Hakata Station, Canal City and Tenjin has led to increasing retail supply and tenancy improvement activities in each district. Ground floor monthly asking rents in Tenjin-nishi- dori Street range between JPY 50,000 and JPY 60,000 per tsubo (USD 128 to USD 155 per sqm).


Abenomics revived confidence in Japan’s real estate investment market, including the retail sector, with Tokyo dominating retail property transactions, while Osaka and Fukuoka are also attracting investors.

In 2013, retail property transactions totalled approximately JPY 800 billion (USD 6.8 billion), up 62% y-o-y. Almost 70% of recorded retail transactions took place in Tokyo, where a total acquisition volume of JPY 551 billion (USD 4.7 billion) was recorded, rising 63% y-o-y.

In 2014, the trend for Tokyo continued, with department store operator Takashimaya’s purchase of a 60% ownership interest in the Times Square Building near Tokyo’s JR Shinjuku Station for JPY 105 billion (USD 890 million), a prime example. Takashimaya already owned a 40% interest in the 174,500-sqm property, where its Shinjuku department store is located.

Retail transaction volumes in Osaka also saw y-o-y growth for 2013, up 187% to JPY 149 billion (USD 1.26 billion), while Fukuoka saw an 80% increase to JPY 53 billion in 2013 (USD 450 million).

Domestic purchasers still dominate the market, with J-REITs, local private investors and listed companies accounting for approximately 35%, 20% and 18% of the total transaction volume respectively, according to Savills.

According to Colliers, as of the end of September 2014, the total JREIT market capitalisation stood at JPY 9.08 trillion (USD 770 billion) for 46 listings, including three new listings year to date. There are three retail focused JREITs currently listed.

International investors are starting to take note of Japan’s offering, however, with cross-border investment increasing steadily. In 2013, cross-border transactions totalled almost JPY 100 billion (USD 850 million), reflecting an increase of 10% y-o-y and accounting for approximately 12% of last year’s total transaction volume.

While a question-mark hangs over Japan’s potential recession, one thing is for sure: with the 2020 Tokyo Olympics now on the horizon, tourism numbers will continue to grow, meaning that retail developments in Japan look likely to continue as a solid investment for the near future.


[1] 1 tsubo equals 3.3 sqm