Retail Marketbeat Report

OUTLOOK

• Top rents in luxury districts to increase: Top rents in Ginza, Omotesando and Shinsaibashi have already exceeded pre-COVID levels, with further increases expected over the next 12 months. In these luxury retail districts, landlords can transfer cost increases to their tenants, lifting the lower levels of rent in Ginza, Omotesando and Shinsaibashi. With a series of major redevelopment initiatives running through 2030, we advise to monitor if this will translate into overall rental growth along with the arrival of major redevelopment projects.
• Overall inflation-adjusted rents to remain flat: Although top rents in prime locations are expected to continue to rise moderately, we see a cycle of overall rental growth lagging behind the inflation rate in the next two years. More tenants are unwilling to accept rental increases as retail sales growth is largely offset by rises in labor, energy and material expenses. We expect most tenants’ capacity to pay rent will remain weak along with the overall weak consumption trend.