The retail landscape in Japan is witnessing a curious tug-of-war; while rents have climbed for twelve consecutive quarters, the pace of this increase appears to be slowing.
Steady Climb in Retail Rents
According to a recent report by JLL, retail rents in Japan averaged JPY 99,660 per tsubo per month in the first quarter of 2025. This marks a 1% rise quarter-on-quarter and an impressive 8.9% increase year-on-year. However, for the fourth straight quarter, the rate of rental growth seems to have plateaued.
Capital Values Trend Upward
During the same quarter, capital values also saw a healthy upturn, rising by 1.4% on a quarterly basis and 10.8% year-on-year. Among the notable transactions was the joint acquisition of Tokyu Plaza Ginza, where Gaw Capital obtained 91% and Patience Capital Group secured the remaining 9% from Sumitomo Mitsui Trust Panasonic Finance.
Economic Factors at Play
Overall employee income showed gradual recovery, and consumer confidence largely held steady, with inbound tourism setting monthly records. Against this backdrop, retail sales reached JPY 12.7 trillion in January, reflecting a solid 4.4% increase compared to the previous year.
Luxury Retail: A New Chapter
Demand for new store openings appears to be cooling off, as many major luxury brands are nearing the end of their expansion strategies. However, noteworthy new openings are still on the horizon, including Brioni’s latest boutique at Kirarito Ginza in February, and Tiffany’s upcoming store on Ginza Chuo-dori slated for July.
Future Developments on the Horizon
The retail scene will soon see some exciting developments. Construction on the Hulic Aoyama Building—situated at the busy intersection of Omotesando and Aoyama Dori—is set to commence in April. This nine-storey structure, boasting a gross floor area of 9,700 sqm, is anticipated to be completed by 2028.
Looking Ahead: A Cautious Optimism
While the March forecasts from Oxford Economics indicate a downward revision of just 0.9% in private consumption growth for 2025, the leasing market is expected to keep rents on the rise, albeit at a moderated pace due to waning demand. Concurrently, capital values are projected to move in tandem with rent increases, with cap rates likely remaining stable.
Questions & Answers
What recent trends are impacting retail rents in Japan?
Retail rents have increased for twelve consecutive quarters, but the pace of this growth is slowing, indicating a potential easing in market conditions.
What notable retail transactions occurred recently?
A significant transaction was the joint acquisition of Tokyu Plaza Ginza by Gaw Capital and Patience Capital Group, marking a key moment in the market.
What is the outlook for future retail developments?
Several major projects, such as the Hulic Aoyama Building redevelopment, are set to start soon, promising to enhance the retail landscape and attract more shoppers in the coming years.
AloJapan.com