High street rents rise in Shinsaibashi, Kyoto and Tenjin on strong inbound recovery
+0.5pts
Ginza High Street Vacancy Rate **** Q2
Starting Q3 2022, vacancy rate surveys will no longer be restricted to ground floor properties for which tenant demand is highest, but will instead cover all units for lease, including those on the ground floor.
━ Tokyo: Ginza high street vacancy rate for Q2 2023 rose by 0.5 % points (pp) q-o-q to 6.7%, mainly due to a vacancy of a relatively large unit, although it has been getting inquiries from prospective tenants. The high street rents remained unchanged, standing at JPY 257,600 per tsubo per month. Demand is seen from luxury brands as well as fashion brands. However, there were no leases that implied further rise in market rents this quarter.
━ Osaka: Shinsaibashi high street vacancy rate fell by 1.2 pp q-o-q to 3.4% as more take-up was seen in the Shinsaibashi-suji shopping district. The High street rents surged by 17.7% q-o-q to JPY 193,000 per tsubo per month, as demand was driven by luxury brand on Mido-suji, and by retailers targeting the inbound demand in the Shinsaibashi-suji shopping district.
━ Nagoya: Sakae high street vacancy rate was flat q-o-q at 0. 0%. As in the previous quarter, there were no additional vacancies. The high street rents remained unchanged for the second straight quarter at JPY 71,000 per tsubo per month. During the quarter, one relatively large unit in the high street area of Otsu-dori confirmed an overseas brand as its new tenant at current market rates.
± 0.0%
Ginza High Street Rent **** Q2
Source: *Ministry of Economy, Trade and Industry
**Japan Department Stores Association ***Japanese Cabinet Office ****CBRE
Economy
Department store sales up 6.8% y-o-y
National department store sales rose 6 8% y-o-y in Q2 2023, the 16th consecutive month of positive growth In addition to luxury brands and other high-end products, which continued to grow, sales of clothing and cosmetics were also strong This was mainly due to growth in travel and business demand as a result of downgrading the COVID-19 to “common infectious disease” The end of entry restrictions and the weakening of the yen also led to a surge in inbound sales, which rose 320 3% yo-y to ¥28 billion in June, the highest since the COVID-19 in February 2020 It was only 0 8 % lower than the pre-COVID-19 period in June 2019
In April-June 2023 the number of foreign visitors to the country was approximately 5.92 million. This is only 31.0% less than the pre-COVID Q2 2019, with June being the first time since February 2020 that the number exceeded 2 million.
The Consumer Confidence Index increased by 0 2 points m-o-m to 36.2 in June 2023, the fourth consecutive monthly increase Views on income and employment have improved following wage increases in the spring labour negotiations The normalisation of the economy also contributed to the improvement in consumer sentiment
Tokyo: Ginza
More interest in properties which had previously attracted few inquiries
Ginza high street vacancy rate for Q2 2023 rose by 0 5 pp q-o-q to 6 7%, mainly due to a vacancy of a relatively large unit, although it has been getting inquiries from prospective tenants
Ginza high street rents remained unchanged from the previous quarter at JPY 257,600 per tsubo per month. In addition to a continuation of the demand seen from luxury brands, the period witnessed more interest from fashion brands. However, there were no leases that implied further rise in market rents during the quarter. However, rents are expected to continue to climb steadily in the coming quarters, with CBRE projecting average rents to increase by 1.5% by the end of Q3 2023, at which point rents would exceed the pre-pandemic level of Q4 2019 by 1.4%. Although rents are projected to rise by 3.3% between now and Q4 2024 a slight downturn may commence from Q1 2025 as demand from luxury goods brands, which are currently driving the market, may begin to subside. A potential strengthening of the Yen may serve to slow inbound tourist demand which could also affect the retailer sentiment.
Several available properties in the high street area of Chuo-dori registered an increase in retailer interest in Q2 2023, with a tender for one property securing a high-end wristwatch brand at close to the asking rent Also this quarter, some retailers were beginning to express an interest in comparatively large long-term vacancies as locations for expansion On Chuo-dori, availability was observed to be beginning to fall behind retailer demand, leading to luxury brands taking interest in new developments not due for completion for several years At the same time, however, several tenants of larger units were seen to be considering closing their doors in response to weak sales However, some such units have already secured new tenants or attracted interest from multiple retailers.
During the quarter, a relatively large property in a secondary area asking above market rents managed to secure a tenant at just below its asking rate The rapid recovery in foreign tourist numbers during the period also generated significant interest in new store space from several duty-free stores and drugstores.
Tokyo: Omotesando/Harajuku
Demand for high street store space seen from wide range of sectors
Omotesando and Harajuku’s high street vacancy rate for Q2 2023 was up by 0 5 pp q-o-q to 7 2%, mainly due to several vacancies on the Harajuku side High street rents for Omotesando and Harajuku remained unchanged q-o-q for the second straight quarter, standing at JPY 188,800 per tsubo per month Demand this quarter was focused on several new developments in superior locations in high street areas, with potential tenants hailing from a wide range of sectors, from luxury goods to interior furnishings showrooms Competition between retailers for these highly prized locations may result in leasing contracts being signed at above asking rents in the coming quarters Elsewhere, a relatively large property in the high street area of Meiji-dori drew interest from fashion retailers, showroom operators, and amusement arcade operators during Q2 2023. Proposed rents have risen slightly since the property first became available last year due to strong competition between retailers. Also this quarter, the owner of a property experiencing prolonged vacancies on the Miyuki-dori high street began to show greater flexibility with respect to rental conditions, leading to increased enquiries and even an agreement to let some of the space.
After receiving multiple tenders, an available property in the secondary area of Kotto-dori selected an interior furnishings retailer as its new tenant in Q2 2023 Some of the retailers who missed out on the property are now looking further afield for a potential site.
Tokyo: Shinjuku
Tenants elect to stay open amid resurgent inbound tourist demand
Shinjuku’s high street vacancy rate was up by 0.1 points q-o-q to 6.7%. Shinjuku high street rents remained unchanged for the sixth straight quarter, standing at JPY 170,000 per tsubo per month During the quarter, several available properties on the Shinjuku-dori high street attracted demand from showroom operators and fashion brands. Some retailers who had previously abandoned plans to open new stores were observed to be reconsidering their plans following the normalization of economic activity and the recovery in inbound tourist demand. Similarly, several existing tenants who were previously intending to close their doors or downsize have seen sales figures recover on the back of resurgent foreign tourist demand, which has prompted them to keep their stores open Drugstore brands are also searching for new locations to take advantage of inbound foreign tourist demand. Rather than the larger units favored prior to the pandemic, they are seeking smaller stores of less than 50 tsubo to keep rental costs low.
During the quarter, the owner of a comparatively large unit in a secondary area which had been vacant for some time began to adopt a more flexible stance by offering to lower asking rents or subdivide the building to potential tenants.
Tokyo: Shibuya
Strong demand seen from brands targeting younger shoppers
Shibuya’s high street vacancy rate for Q2 2023 fell by 3 0 points q-o-q to 2 9% as a relatively large units confirmed new tenants Shibuya high street rents remained unchanged for the third straight quarter, staying at JPY 127,800 per tsubo per month During the quarter, an available property in the high street area of Dogenzaka confirmed a drugstore as a new tenant at a rent level roughly equivalent to market rates Elsewhere, another available property on Koen-dori attracted interest from multiple retailers, with its superior visibility and branding-friendly exterior likely to stimulate competition among retailers that will push up rents In high street areas, demand for store space was seen from both luxury goods brands and pop-up stores All cases involved retailers looking to market their brands to younger demographics. Also this quarter, an Asian brand was understood to be planning to open its first street-level store in Japan in the Shibuya area as part of a concerted push into the Japanese market.
During the quarter, a unit in a secondary area that had been vacant for some time finally began to attract increased interest after its owner agreed to expand the range of sectors it would be willing to lease to. Elsewhere, an existing tenant some distance from the station was said to be considering a move to a location with more foot traffic near the Shibuya crossing or perhaps even opening a second store in the area.
*The data covers five areas, including Ginza, Omotesando Harajuku, Shinjuku, and
Kansai: Shinsaibashi
High street rents surge by 17.7% q-o-q
Shinsaibashi high street vacancy rate for Q2 2023 fell by 1 2 points q-o-q to 3 4% on the back of tenants being confirmed in the Shinsaibashi-suji shopping district
High street rents in the Shinsaibashi district of Osaka grew by 17.7% q-o-q to JPY 193 000 per tsubo per month in Q2 2023 thanks to robust demand from luxury brand goods retailers on Mido-suji and retailers targeting the recovery in inbound tourist demand in the Shinsaibashi-suji shopping district. While rents had at one point fallen some 30.3% below the pre-pandemic level of Q4 2019, they have now recovered to just 2.5% below that mark.
While demand was seen this quarter from multiple luxury brands for store space on the Mido-suji high street, the limited number of available units for lease created upward pressure on rent levels.
As in the previous quarter, several enquiries were received for space in the high street area of the Shinsaibashi-suji shopping district from retailers targeting the resurgent inbound tourist market In some cases, companies were observed to be looking to secure multiple units on both the north and south side of Nagahori-dori, while others were looking to expand into new businesses to target tourist demand Most such retailers are not interested in units under development, or which currently have a tenant finishing their lease Instead, their interest lies in already vacant units which are ready to accommodate a new store immediately, as they wish to take the quickest possible advantage of the sudden resurgence in inbound tourist numbers However, with fewer such vacancies than last quarter, competition between retailers has pushed rent levels upward It should be noted, however, that in comparison to prior to the pandemic, units with less floor area are more popular. Elsewhere, some demand was seen from retailers with an existing street-level presence in the Shinsaibashi area who are looking to relocate to better or larger premises, as well as from popup store operators. Some such retailers are still formulating their storefront strategies and taking time to decide whether to expand or open a second store.
During Q2 2023, demand was seen in secondary areas from stores selling second-hand luxury brand items. Several recycled goods stores secured cheaper units this quarter, one of which was just 10 tsubo in size but commanded rents above the market rate.
Kansai: Umeda
Limited availability of street-level stores despite demand from wide range of sectors
Umeda high street rents remained unchanged for the second straight quarter at JPY 101,500 per tsubo per month Demand for store space in the Umeda area was seen from a wide range of retailers this quarter, including showroom operators, fashion brands, recycled goods stores, musical instrument stores, and purveyors of general goods While some of these retailers have no prior street-level presence in the Umeda area, others are relocating from existing premises to improve location or expand floor space, with some desiring comparatively large spaces While some retailers secured premises for their new stores this quarter, the paucity of available units in the area meant that the majority had yet to sign leases As a result, current demand is likely to take some time before materializing in the form of actual store openings Also this quarter, a retail complex to the south of Osaka Station, which had been struggling to find new tenants, managed to reduce its vacant area by securing a new service provider as a tenant.
The secondary area of Chaya-machi continued to see a high concentration of recycled goods stores in Q2 2023, with another opening its doors during the period and continued demand from other operators in the same industry.
Kansai: Kyoto
Positive sales figures lead some retailers to open multiple stores in same area
Kyoto’s high street vacancy rate for Q2 2023 was up by 0 2 points q-o-q to 8 0%, mainly due to a 100 tsubo-sized vacancy on Shijo-dori Kyoto high street rents for the quarter rose by 6 3% q-o-q to JPY 85,000 per tsubo per month During the quarter, several drugstore brands were observed to be searching for new locations on the Shijo-dori high street to take advantage of the sudden recovery in inbound foreign tourist demand Among these were some groups who already have stores in the Kyoto area but whose sales figures are so encouraging that they are looking to open another Demand from this sector was a major factor underpinning rental growth this quarter During Q2 2023, an available property on the Shijo-dori high street secured as its new tenant a luxury goods brand at its roughly market-level asking rent. Elsewhere, several fashion brands without a previous presence in the Kyoto area confirmed new stores, each of which was in a comparatively small unit of less than 50 tsubo. While owners are demonstrating flexibility by considering subdivision of larger units in response to retailer demand, this generally leads to a higher per-tsubo rent rate for these smaller units.
Demand also strengthened in the secondary area of Karasumaru-dori during Q2 2023 with an available property in the area under consideration from an interior furnishings brand looking to relocate to a superior site.
Kansai: Kobe
Available units attract interest from multiple quarters for locational improvement
Kobe’s high street vacancy rate for Q2 2023 was flat q-o-q at 5 2% Vacancies on relatively small sizes have been taken, while new vacancies of the same size have also emerged Kobe high street rents remained unchanged for the second straight quarter at JPY 80,500 per tsubo per month During the period, several luxury goods brands opened new stores on the Akashimachi-suji high street in the Former Foreign Settlement area All cases involved tenants relocating to larger or more desirable sites The former locations for these stores also attracted plenty of interest over the quarter, with one unit confirming a new tenant In all cases, agreed rents were signed at market levels Also this quarter, another available property in the same Former Foreign Settlement area secured an interior furnishings store as its new tenant, with the unit’s location, size, and reasonable rent proving attractive. Elsewhere, a drugstore was confirmed as a tenant in an available property on the Sannomiya Center-gai, while new contracts were confirmed for fashion brands and recycled goods stores without a previous presence in the Kobe area. While the gradual return of foot traffic to the Center-gai area has led to an increase in retailer interest, this has yet to push up average rents for the area.
Also this quarter, a fashion brand opened a new store in the secondary area of Sannomiya Chuo-dori, while another new development on the same street drew interest from prospective tenants including a showroom operator.
Nagoya: Sakae
New store confirmed on Otsu-dori for overseas brand
Sakae high street vacancy rate for Q2 2023 was flat q-o-q at 0 0% As in the previous quarter, there were no new vacancies Sakae high street rents remained unchanged for the second straight quarter at JPY 71,000 per tsubo During Q2 2023, an available property on the Otsu-dori high street secured an overseas brand as its new tenant Although the unit’s relatively large size and consequently expensive rent had previously dissuaded retailers from expressing serious interest, its rental conditions matched the criteria for this retailer, which had no previous street-level presence in the area While the offered rent was below that paid by the previous tenant, the lease was signed at the going market rate The Sakae high street vacancy rategv remained unchanged for the third straight quarter at 0.0%, with no properties available for lease. This led retailer interest to be concentrated on new developments not due for completion for several years, with interested retailers including multiple luxury goods brands Recent quarters have even seen a few cases in which retailers have purchased properties to secure space for future stores.
While a major tenant elected to withdraw from its unit a commercial complex on Isemachi-dori during the quarter, a replacement tenant was quickly found. Also this quarter, another property on the same street attracted significant retailer interest due to its excellent visibility but had yet to secure a tenant, likely due to its relatively large floor space.
Fukuoka: Tenjin
High street rents surge by 16.8%
Tenjin’s high street vacancy rate for Q2 2023 fell by 0 5 points q-o-q to 2 5, due to several vacancies confirmed new tenants High street rents in the Tenjin district of Fukuoka spiked by 16 8% from the previous quarter to reach JPY 55,500 per tsubo in Q2 2023 The rapid resurgence in foreign tourist numbers generated significant interest in new store space from multiple drugstore operators during the quarter, with one drugstore confirmed for a unit on Tenjin Nishi-dori at a higher rent than was paid last quarter Other contracts were signed this quarter by retailers including a sporting goods brand and a mobile phone dealer looking to increase store numbers on the back of positive sales figures, again at rents above the market rates observed in Q1 2023 Leased units included some which had stood empty for some time owing to their impractical layouts Also this quarter, another relatively large property that had also received little previous interest attracted some enquiries. These cases indicate that retailer demand is on the rise because of resurgent visitor numbers, which pushed up rents for the quarter.
During the quarter, plans were seen to be proceeding for the development of a new commercial and office complex on the former site of the IMS Building on Watanabe-dori in a secondary area. Retail spaces are planned for the two floors directly above and the two directly below ground level. Construction is slated to begin in July of this year, with completion scheduled for March 2026. This new development is expected to stimulate new economic activity in the area.
Starting previous quarter (Q3 2022), vacancy rate surveys will no longer be restricted to ground floor properties for which tenant demand is highest, but will instead cover all units for lease, including those on the ground floor. Source: CBRE, Q2 2023.
Figure 18: Area Traffic Volume (Q1 2023)
Source: Giken Shoji International “KDDI Location Analyzer*” CBRE, Q2 2023.
* Aggregation of “au” smartphone users with individual consent, processed so that individuals cannot be identified.
* The numbers may have changed for the past data due to accuracy improvements of KDDI Location Analyzer data
Terms and Definitions
• Vacancy rate cover all units for lease, including those on the ground floor in the high street areas assigned by CBRE
Tokyo
Meiji Yasuda Seimei Building
Subject Area
Vacancy Rate
Prime rent/ High Street Rent
Area Traffic Volume
• Tokyo - Ginza 150 properties, Omotesando/Harajuku: 239 properties, Shinjuku: 61 properties, Shibuya: 67 properties
• Kansai - Shinsaibashi: 184 properties, Kyoto: 177 properties, Kobe: 106 properties
• Nagoya - Sakae: 53 properties
• Fukuoka - Tenjin: 202 properties
• Ground floor retail space for lease located in retail markets in the high street areas assigned by CBRE with floor area of approx. 200 square meters.
• The retail market areas assigned by CBRE
Term Quarterly Q1) End of March Q2) End of June Q3) End of September Q4) End of December
Vacancy Rate
Prime rent
• Physically available for tenants at the time of survey
• Based on sample survey of the subject area, including CAM, and excluding any incentive such as free rent
• Rents for prime areas within the main retail districts in major cities
Survey method
High Street Rent
Area Traffic Volume
Contacts
Hiroshi Okubo
Head of Research
hiroshi.okubo@cbre.com
• Average of the upper rents and lower rents based on sample survey of the subject area, including CAM, and excluding any incentive such as free rent
• y-o-y and q-o-q % changes of traffic volume in the subject area
Kaoru Kurisu
Director
kaoru.kurisu@cbre.com
Kanazawa
2-1-1 Marunouchi, Chiyoda-ku
Tokyo Osaka
Grand Front Osaka 4-20, Ofuka-cho, Kita-ku Osaka-shi, Osaka
Sapporo
Nihon Seimei Sapporo Building
4-1-1 Kitasanjonishi, Chuo-ku, Sapporo-shi Hokkaido
Sendai
Sendai Mark One 1-2-3 Chuo, Aoba-ku Sendai-shi, Miyagi
Yokohama
Yokohama ST Building 1-11-15
Kitasaiwai, Nishi-ku, Yokohama-shi, Kanagawa
Aube II Building 5-177 Kuratsuki, Kanazawa-shi, Ishikawa
Nagoya
Miyuki Building 3-20-27 Nishiki, Naka-ku, Nagoya-shi, Aichi
Hiroshima
Shishinyo Building 3-17 Fukuromachi, Naka-ku, Hiroshima-shi, Hiroshima
Fukuoka
Fukuoka Center Building 2-2-1 Hakata-Ekimae, Hakata-ku Fukuoka-shi, Fukuoka
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