Average retail rents in Japan surged in majority of areas in the first quarter of the year, according to new research by CBRE. In a positive sign of recovery, average rents in seven out of 10 surveyed areas by CBRE experienced substantial growth, with Kyoto surpassing pre-pandemic levels for the first time in the first quarter of 2024.
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Alongside Kyoto, three other areas, Ginza, Shinsaibashi, and Kobe, also saw rents soar above pre-pandemic rates, signalling a rebound in consumer confidence and economic activity.
The sharpest decline in vacancy rates from the previous quarter was observed in Shibuya, where a significant drop of -3.4 percentage points was recorded.
Kyoto witnessed the most significant rise in average rents, posting an impressive increase of +14.0 percent. The surge in retailer interest can be attributed to the influx of foreign tourists, which has stimulated demand in the region.
Q1 retail sales in Japan consistently offered a bright spot for European luxury groups (see above), while the rest of APAC and other markets delivered varying degrees of success.
CBRE said vacant spaces were swiftly filled by outdoor and sporting goods brands, fashion retailers, and luxury goods brands in Q1. Notably, the outdoor and sporting goods sector exhibited robust demand, with retailers actively seeking relatively large units in prime high street locations across the country.
Nationwide, the supply-demand balance remains tight, with three areas now operating with vacancy rates below 1 percent.
The outdoor and sporting goods sector emerged as the primary driver of new store demand, accounting for 22.6 percent of the newly secured retail space in the quarter.
This sector’s expansion is propelled by growing health consciousness among consumers and an uptick in overseas tourism. Retailers in this segment continue to seek larger units in prime locations nationwide.
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Fashion and luxury goods brands also contributed significantly to the surge in new store openings. Notable demand within the fashion segment was observed from apparel, wristwatches, and eyewear retailers, with a particular emphasis on units in the Tokyo area.
As the retail sector shows signs of recovery and consumer demand increases, these developments in average rents, vacancy rates, and new store openings indicate a positive trajectory for Japan’s retail market.