Japan - April 2024

S P OT L I G H T
Savills Research

Japan Retail

Retail sales in Beijing were up 4.4% year-on-year to RMB539.8 billion in 1H 2018

Japan RetailMarket optimism high,but tenants feeling cost pressures
Summary• Average 1F rents in Tokyo haveremained mostly flat over the
past half-year, and the retailsector has overall been thrivingwith vacant units becoming
harder to spot.
• In regional markets, averagerents dipped slightly, althoughmost regions, especially thosedependent on inbound tourism,
have continued to improve.
• Investment volumes in theretail sector in 2023 haveleapfrogged those of 2022,
partly due to the large Seibu
and Sogo deal.
• The number of inbound tourists
has hit new highs, and many
areas have seen an increasing
number of stores catering tothem. However, some nonprime areas still appear to besuffering.
• Appetite for luxury products
amongst both domestic andinternational consumers
remains elevated, and high-end
retail is likely to draw increasing
amounts of interest.
• Optimism in the market is highand some landlords have thus
been eyeing rental increments.
However, inflationary pressures
have depressed operating
margins of tenants, many ofwhom may not be able to handle
higher rents.

TOKYO SUBMARKET RENTS
According to the semi-annual survey
conducted by the Japan Real Estate Institute(JREI) and BAC Urban Projects, averageasking rents for 1F units in Tokyo saw minimalchanges, decreasing 0.1% half-year-on-halfyear (HoH) in 2H/2023, but rising 1.2% yearon-year (YoY). Non-1F average asking rents
moved in a similar direction, dipping by aslight 0.9% HoH, while increasing 1.7% YoY.
Overall, market sentiment has become morepositive as society has progressed deeper
into post-pandemic territory, and all areas,
especially inbound tourist dependent ones,
have been faring better.
The retail sector has continued to improve,with 2023 seeing record-high sales in the
country, partially supported by the numberof inbound tourists that continues to growand has hit new highs. According to Graph 1,
retail sales in Japan in 2023 hit JPY163 trillion,
having increased 6% from the previous year,
and even surpassing levels of the bubble era.
At the same time, moderate inflation has
played some part in this trend over the past
year. In fact, although sales have increased,rising material costs, labour costs, and higher
energy prices are still causing many stores
to struggle, in stark contrast with landlords
that have become more bullish on market
prospects and are eyeing rental increments.
The market has been in the best condition
since the pandemic began, and inboundtourism is serving as a large tailwind forthe retail sector. Domestic consumption
should also improve, supported bynoticeable wage growth. At the same time,bifurcation in the market is still present,
and the general rhetoric of prime locations
faring considerably better than non-prime
counterparts continues to ring true. This will
likely persist for the time being, as the market
adjusts to new conditions, and sectors, like
F&B, make a steady comeback.
Ginza
Average 1F asking rents in Ginza continued
to contract by 5.2% HoH and 11.4% YoY to
JPY68,700 per tsubo in 2H/2023. However,this decline in rents was primarily due tomore units in prime locations being taken off
the market, and indeed there have been fewer
1F listings compared to 2022. Non-1F rents
saw much smaller changes, dipping by a slight
0.8% HoH to a 2.6% annual increment at
JPY35,000 per tsubo.
Ginza is the premier retail district in Japan,
known for showcasing luxury brands, andits name is associated with being high-end. A
number of new openings of such branded goods,
have been observed, including Jimmy Choo along
Chuo Street, where Balenciaga is also reportedly
opening a new store in May 2024. Other notableopenings include Onitsuka Tiger’s Red Concept
Store along Matsuya Street and Nike in Ginza
Glasse. Elsewhere, a more unlikely player, thediscount supermarket OK, has made its entrance
into the basement floors of Marronnier Gate
Ginza 2, showing that the area could still haveroom for different content genres.
The resurgence of inbound tourism has
undoubtedly helped to prop up Ginza, withstores of luxury brands, department storesenjoying notably higher levels of footfall. In

GRAPH 1: Japan Retail Sales, 1980 to 2023
180

• While the retail sector isrecovering overall, performancestill varies greatly depending on
location and tenant.

160
140

JPY TRILLION

120
100
80
60
40
20
0

Source Ministry of Economy, Trade and Industry, Savills Research & Consultancy

savills.co.jp/insight-and-opinion/2

Japan Retailthe case of the F&B industry, vacant units
can still be observed, especially on mid-level
floors. This situation is expected to steadily
improve with both domestic and inboundinflows continuing to rise. Overall, thearea is expected to continue doing better,
especially in the case of luxury goods, which
demand has not waned for.

The retail sector has continued
improving, especially in areas popularwith inbound tourists, and there havebeen more store openings catering
to international visitors. Lukewarm
domestic consumption should also
improve due to noticeable wage
growth. While prime areas are
performing very well, some non-prime
areas are still struggling, showing
some bifurcation in the market. The
optimistic market sentiment has
led some landlords to eye rental
increments, in contrast to tenants whoalready have had operating margins
thinned from rising costs, and this gap
in expectations is likely to persist.

Omotesando
Average 1F rents in Omotesando have risen
7.6% HoH and 6.8% YoY to JPY57,800 per
tsubo. Vacancies in 1F reportedly remainhigh in non-prime areas, although this has
admittedly begun to improve. Non-1F rents
have seen more marginal changes, having
dipped 1.3% HoH and increasing 5.8% YoY
to JPY36,600 per tsubo. Regarding non-1F
rents, Omotesando continues to be the mostexpensive in Tokyo.
The main Omotesando street is home toa lineup of luxury brands that rivals that of
Ginza, and vacancies in this prime area are
generally few and far between. This area
has continued to perform well, with brands
such as Loewe, Celine, Chanel, and Maison
Margiela either increasing floor space orconducting interior renovations. Nearby,
cosmetics retailer Prada Beauty has openeda new store off the main Omotesando street
near Cat Street, suggesting that a new trendof high-end cosmetics in the area could beunderway. Other streets cater generally
to a wider array of tenants, and have seen
a number of new openings over the past
half-year, including Universal Music Store
along Takeshita-dori and Ralph Lauren in
Cat Street. In fact, these streets, along withothers like Meiji-dori, which had high levelsof vacancies during the pandemic, have
improved significantly, with multiple new

openings of second-hand clothing stores andcasual fashion shops.
The significantly improved footfall frominbound tourists has helped to breathe newlife into Omotesando, which should continue
to gradually see vacancies decrease. Even

GRAPH 2: Tokyo 1F Rents, 2015 to 2023
Ginza
Shinjuku
Average asking rent

90

Omotesando
Shibuya

70
60
50
40
30
20
10

2015

2016

2017

2018

2019

2020

2021

2022

2H

1H

2H

1H

2H

1H

2H

1H

2H

1H

2H

1H

2H

1H

2H

1H

2H

0
1H

THOUSAND JPY / TSUBO

80

2023

Source JREI, BAC Urban Projects, Savills Research & Consultancy

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the fashion industry, which had a laterecovery, has seen more new store openings,
suggesting that optimism is high.
Shinjuku
Average 1F rents in Shinjuku fell sharply
by 10.3% HoH and 15.8% YoY to JPY48,100
per tsubo. However, this drop in rents isthought to be due to a decline in the numberof available prime units, and actually points
to signs that the market is improving. Non1F rents have decreased 4.7% HoH and 6.3%
YoY to JPY32,500 per tsubo, and are now
the lowest amongst the four submarkets inTokyo.
Isetan Shinjuku has hit new record highrevenues, with 2023 levels surpassing thoseof FY2022. The department store has been amajor beneficiary of the rebound in inboundtourism, with Louis Vuitton opening a newstore targeted at male patrons, in March
2024. Meanwhile, Lumine and similar
fashion-centric malls and buildings havereportedly recovered to about 5% to 10% shy
of 2019 levels as of 2023, but nonethelesslook to continue improving going forward
as both the fashion and F&B industries havemore optimistic outlooks.
Vacancies along Shinjuku-dori appear
to be more sparse, and some lots that wereJapan Retailvacant for prolonged periods of time appear
to have found tenants. High-end brandstores have been comparatively rare in
Shinjuku, but it appears that some brands
have looked to capitalise on this and thelarge inbound tourism traffic that the area
brings, with reports of some new openings
in the pipeline. Overall, the prospects ofShinjuku retail are bright.

Meanwhile, rents on non-1F floors haverisen slightly by 3.4% HoH and 5.0% YoY to
JPY33,800 per tsubo.
Shibuya is reported to have welcomedeven more inbound visitors than Shinjuku,
claiming the number one spot in Japan.
Shopping malls have also been performing
well, with Shibuya Parco reporting a 63.8%
increase in sales between March andAugust 2023 compared to the same period
in the previous year, with tax-free sales
accounting for a third of revenue. Unlike
its counterparts in the Tokyo market,
Shibuya does not have a particular street
dedicated to luxury brands, but the varietyof unique entertainment that it boasts has
allowed it to become a key global tourist

Shibuya
Average 1F asking rents in Shibuya havegrown by a considerable 9.0% HoH and 38.8%
YoY to JPY60,500 per tsubo, and are now
the second most expensive in Tokyo. New
listings have been on the decline, and there isconsiderably more confidence in the market.

destination. Indeed, it has shone elsewhereas a cultural hub of Tokyo, and the multiple
developments that have transformed thesubmarket over the past decade has helped
to constantly renew interest in the area. For
instance, QFRONT, which hosts the iconic
Shibuya Tsutaya store at the forefront of
the scramble crossing will have its renewed
opening at the end of April 2024.
Prospects for Shibuya are high, andits ability to attract inbound visitors andyoung crowds is unrivalled. More upcoming
developments like Shibuya Sakura Stage insummer 2024 will continue to add to theexcitement that the area has to offer. Given
the strength of Shibuya, rents in the area are
expected to remain high going forward.

GRAPH 3: Tokyo Non-1F Rents, 2015 to 2023
Ginza
Shinjuku
Average asking rent

45

Omotesando
Shibuya

THOUSAND JPY / TSUBO

40
35
30
25
20
15
10
5
0
1H

2H

2015

1H

2H

2016

1H

2H

1H

2017

2H

1H

2018

2H

1H

2019

2H

2020

1H

2H

1H

2021

2H

2022

1H

2H

2023

Source JREI, BAC Urban Projects, Savills Research & Consultancy

GRAPH 4: 1F Rents in Retail Districts of Regional Cities, 2014 to 2023
Shinsaibashi
Fukuoka Tenjin
Sapporo45

Nagoya Sakae
SendaiAverage asking rent

THOUSAND JPY / TSUBO

40
35
30
25
20
15
10
5
0
1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H 1H 2H
2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Source JREI, BAC Urban Projects, Savills Research & Consultancy

savills.co.jp/insight-and-opinion/

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REGIONAL CITIES
Average 1F asking rents in regional cities roseby 2.6% HoH and 10.9% YoY to JPY27,200
per tsubo in 2H/2023. Non-1F rents moved
in the opposite direction, declining 4.3%
to JPY16,140 per tsubo, albeit remaining
0.2% higher on an annual basis. In general,
optimism has significantly improved associety has progressed further into postpandemic territory, and the return ofenthusiastic inbound tourists has prompted
an increase in the number of stores cateringto them. At the same time, rising operating
costs due to inflation and higher energy
prices have put considerable downward
pressure on profit margins, in contrast withlandlords that have become more bullish in
the current market environment and might
be eyeing rental increments. As such, rental
increments could be on the horizon but
would be dependent on the area and tenant inquestion.
In Osaka’s Shinsaibashi, average asking
1F rents have increased by 11.6% HoH
and 12.9% YoY to JPY39,400 per tsubo,
attaining the highest levels in the past
decade. Non-1F rents moved in the opposite
direction, dipping 8.5% HoH and 5.2% YoY
to JPY18,400 per tsubo. While the area
is highly dependent on inbound tourism
and has hence seen significant recovery inaccordance with the return of international
visitors, bifurcation within the submarket
has been observed. For instance, drugstores
have reportedly been fighting for new spacealong the main Shinsaibashi-suji shopping
street, like with Matsumoto Kiyoshi opening
three new stores within a short period oftime, and luxury brands have also been
competing for space along Midosuji. In suchcases, landlords will likely have been able toincrease rents due to the high demand frompotential tenants, with rumours of some
luxury tenants paying rents that greatly
surpass pre-pandemic levels. At the sametime, the number of vacancies in less prime
locations does not appear to have improvedJapan Retailas much. Nevertheless, optimism is high dueto the comeback of inbound tourism, which
could look to propel the submarket to higher
rental levels.
In Nagoya’s Sakae, asking 1F rents
have risen by 5.9% HoH and 11.6% YoY to
JPY25,100 per tsubo, while non-1F rents
dipped by a slight 0.6% HoH and YoY.
While not historically an inbound-tourism
dependent area, Sakae has benefitted
somewhat from the inflows of international
visitors and retail performance in thearea has overall been improving, with its
landmark Matsuzakaya department store
reporting a 6% increase in sales in 2023
compared to 2019 levels. New store openings
continued, especially along Otsu-dori. For
instance, Alpen has opened its flagship store
in nearby Nadya Park. At the same time, thenumber of vacancies has generally remained
unabated, partially contributed by the
new supply entering the market, but also a
harbinger of more prominent bifurcationmaterialising. Nonetheless, 2024 is an
exciting year for Sakae, with the full openingof the Chunichi Building that should
increase traffic around the area, and the firstphase opening of Matsuzakaya’s renovation
towards the end of 2024.
Average asking 1F rents in Tenjin’s
Fukuoka dipped by 12.4% HoH and 9.5% YoY
to JPY21,900 per tsubo, and non-1F rents
moved in a similar direction, decreasing
14.7% HoH and 3.1% YoY to JPY15,700 per
tsubo. However, the decline in rents isreported to be a result of more expensive
units being taken up. Tenjin has ridden the
rapid surge of inbound tourism, with market
conditions improving notably and seeing alarge number of store openings catering tointernational visitors. Luxury goods havebeen faring particularly well. With revenues
at Iwataya Mitsukoshi seeing about a 14%
increase from the previous year in FY2023.
Vacant space has become harder to spot,
although still visible in some areas wherelandlords have been more unwilling tocompromise on rents. Overall, expectations
for the area are high with Tenjin Big Bang
redevelopments underway, and Fukuoka
Airport’s expansions that will increase
capacity and further encourage inboundvisitor inflows.
In Sendai, average asking 1F rents
increased by 0.7% HoH and 11.4% YoY
to JPY28,400 per tsubo. Non-1F rents
increased by 3.8% HoH and 6.5% YoY to
JPY16,400 per tsubo. The Sendai market
has made gradual improvements, andvacancies in 1F units have become scarcer.
At the same time, the Yodobashi Sendai No.1
Building that opened in June 2023 appears
to have further gravitated traffic towards the
Sendai station area. The shopping streets havealso demonstrated steady improvements,
but listings remain elevated, with notablevacancies observed along areas with many
F&B tenants. While more attention has been
focused on the station area, prospects for the
shopping arcade may look more promisingwith some redevelopment plans in thepipeline, like the new medical mall by Aqua
that plans to be opened in the summer of 2025.
Sapporo’s 1F rents have increased 3.9%
HoH, and a spectacular 36.8% YoY to
JPY21,200 per tsubo. Non-1F rents haveincreased 2.3% HoH and 6.3% YoY to
JPY13,500 per tsubo. As a popular inbound

GRAPH 5: Retail Property Investment by Region, 2009 to Q1/2024*

1,400

Tokyo
Osaka
Kanto (Ex-Tokyo/Yokohama)
Other

Yokohama
FukuokaKansai (Ex-Osaka)
Of which Tokyo (%) (RHS)

70%

1,200

60%

1,000
JPY BILLION

80%

50%

800

40%
600

30%

400

20%

200

10%

0

0%

Source MSCI Real Capital Analytics, Savills Research & Consultancy* Q1/2024 volumes are preliminary and are likely to be revised upwards.
In principle, MSCI investment volumes do not include related-party transactions,such as those between a J-REIT and its sponsor.

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tourist destination, the retail market in
Sapporo has also benefited from the returnof international visitors, especially in thecase of 1F and other prime units along theconnected underground. For instance, Louis
Vuitton has opened a new store in Daimaru. At
the same time, some areas are still struggling,
most notably the higher floors in the Susukino
area, where vacancies are still high. Goingforward, inbound tourism is expected to play
an increasingly big role in the area’s continued
recovery, while struggling areas like Susukino
have redevelopment plans to look forward
to. Chipmaking factories near Chitose arealso likely to contribute to F&B revenues in
mid-term.
INVESTMENT TRENDS
The semi-annual survey conducted by JREIin October 2023 shows that cap rates of prime
retail properties have tightened in manymarkets across Japan. Sapporo decreased by
20 basis points (bps), while Sendai, Kyoto,
Osaka, Hiroshima, and Fukuoka decreasedby 10bps. Meanwhile, suburban shopping
centres in Sendai and Hiroshima have also
tightened by 10bps over the past half-year.
That said, it should be noted that actual
market cap rates could be as much as 100bps
lower than these surveyed cap rates.
The retail sector has seen heightenedinterest, as seen by the compressing cap
rates of retail properties nationwide. Indeed,
optimism has increased in the market
due to the surge of demand from inboundtourists and recovery in domestic consumer
confidence. Retail assets in prime locations
have thus been highly coveted, and somemajor deals in this sector were observed. For
instance, in November 2023, major home
appliance retailer Edion acquired the Edion
Namba Main Store in Osaka City for JPY54
billion from Mapletree, citing cost reduction
and stable store operations as reasons forthe acquisition. Elsewhere, in a similartransaction, Pan Pacific International
Holdings Corporation acquired Don Quijote
Akihabara from Deka in Chiyoda for an
estimated JPY10 to JPY15 billion.
Meanwhile, suburban retail properties
also appear to have gained greater tractionin the market. Indeed, such assets are able
to provide higher yet stable yields, which
has grown to be increasingly attractive inthe current climate where cap rates of manyother asset classes have become compressed.
Furthermore, such properties also shouldhave potential for value-add through morestrategic asset management. For instance,in February 2024, Mitsui & Co. Digital AssetManagement acquired Nasu Garden Outlet
in Tochigi, which had an appraised valueof JPY22.6 billion, from Sojitz, reportedly
through a securitised token offering that
had raised up to JPY11.4 billion. WhileJapan Retail

TABLE 1: Selected Retail Transactions, announced Q4/2023 to Q1/2024

ANNOUNCEDPROPERTY

LOCATION

GFA(SQ M)

PRICE(JPY BIL)

DIRECTCAP RATE

BUYER

Dec 2023

Edion Namba

Osaka City,
Osaka

23,000

54.0

-

Edion

Feb 2024

Nasu Garden Outlet

Nasushiobara,
Tochigi

31,60022.6(appraisal value)-

Mitsui & Co. Digital AM

Dec 2023

Don Quijote Akihabara

Chiyoda,
Tokyo

7,400

10.0 - 15.0
(estimated)-

Pan Pacific International
Holdings Corp

Mar 2024

iias Kasugai(30% quasi co-ownership interest)

Kasugai,Aichi

70,000(total)6.1

4.4%

Frontier REIT

Mar 2024

Laforet Harajuku(14% quasi co-ownership interest in land)

Shibuya,
Tokyo

2,600
(entire site)

5.9

3.7%

Mori Building

Source Press releases, MSCI Real Capital Analytics, Savills Research & Consultancy

such properties, especially those with stablerevenue and occupancy rates, make for appealingacquisition opportunities, asset management
could also prove to be a challenge, especially forinternational players that lack the experience andon-the-ground talent for managing such large
suburban assets. As such, there are likely to beopportunities available for investors that are able
to overcome such hurdles.
According to preliminary data from MSCI, retailtransactions in 2023 were 40% larger than in 2022,with volumes at nearly JPY1.1 trillion. While colossal
deals such as that of the Sogo and Seibu department
stores have contributed to a significant portionof these figures, they are also representative ofimproving market sentiments of the sector overall.
HIGH-END RETAIL
The retail sector in central areas has seen
tremendous growth, with the continued reboundof inbound tourism supporting this positive
trend. During the pandemic era, luxury retail
was already performing well due to the pentup demand from wealthy domestic residents.
In the present post-pandemic era, while luxury
conglomerates appear to have recently slowed
down at the global level, tailwinds in Japan do notappear to have petered out. In fact, luxury retailappears to have continued on an upward trend,and could be expected to keep improving as overall
tourism in Japan appears to have shifted some
focus on appealing to the high-end market. Moredetails can be found in our “High-End Tourism inJapan” report.
There have been a number of luxury store
openings in Tokyo over the past year. For
instance, Grand Seiko opened their flagship store
in Ginza, which is their third location in thearea, and several luxury brands, such as Jimmy
Choo have opened in Ginza Six. Elsewhere,
Omotesando’s main luxury retail street hassavills.co.jp/insight-and-opinion/

welcomed famous luxury brands BVLGARI
and Tiffany & Co., while luxury watch boutique
Rolex opened a store in Shinjuku in 2023. In the
new Azabudai Hills complex, brands including
Hermes, Cartier, Dior, and Celine have added
new stores in 2024. The multiple new openings
suggest that many brands demonstrate theconfidence in the Japanese market, and more
stores of similar calibre could be seen in otherlarge-scale developments taking place in Tokyo
over the next few years.
Meanwhile, high-end department stores havecontinued to break sales records throughout
2023 and entering 2024, showing the heightened
demand for luxury brands. To exemplify this,Isetan Mitsukoshi, Takashimaya, and Daimaru
Matsuzakaya have all reported considerably
higher sales in 2023 than in 2022 for their
outlets in Greater Tokyo. For instance, Isetan
Mitsukoshi’s sales for FY2023 are reported to
be close to 20% higher than those of FY2022,
Takashimaya’s sales in the first quarter of 2024
were around 15% higher than the same period in
the previous year. Tax-free sales reportedly hit
new levels for these department stores, showingthat inbound tourists have made significant
contributions to the spectacular performance of
these department stores. The significant role that
inbound tourism has played in the high-end retailsector is likely to be highlighted even further,with major players taking significant steps inappealing to international clientele. For example,
Isetan Mitsukoshi has doubled the numberof Gaisho1 staff that serve foreign customers,
and have also promoted foreigner-friendly
membership apps.
Indeed, the average amount spent by inboundtourists has increased significantly in the postpandemic era, with the weakened yen bolsteringpurchasing power. This factor has undoubtedly
1 Gaisho refers to direct sales to clients that are typicallyhigh-net-worth individuals.

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played an important role in boosting revenues ofhigh-end retail. However, there have also beenother factors feeding into this, like governmental
efforts over the past decade to promote inboundtourism through increased numbers of duty-freestores and foreign language services, for instance.
Furthermore, with the global economic slowdown
hitting harder on the working class on top ofelevated airfares, travellers in Japan are generally
wealthier on average than before, and this canalso be seen in the heightened hotel rates thathave surpassed pre-pandemic levels, resulting inoverall spending trends having gravitated towards
those on the higher end. Elsewhere, ultra-luxury
residential developments have also gained greater
traction in the market over the past few years,
many of which are part of a large-scale mixed-use
development that will also tend to have highend retail outlets. Going forward, with Japan’s
emergence as a premier global tourist destination,
on top of the emergence of luxury offerings inresidences, hotels, and more, not to mention the
Integrated Resort (IR) development in Osaka,
more wealthy visitors and clientele will emerge,meaning that high-end retail stores should also
look on track to perform well.
OUTLOOKThe Japan retail market has continued to improve,with popular tourist destinations coming out asclear winners due to the rise of inbound visitors,
which can also be seen by an emergence of a
growing number of shops that appeal to inboundclientele. This resurgence has helped to propagate
retail sales to hit a new record high in 2023. Goingforward, domestic consumption should improve
due to the recent robust wage growth. At the sametime, while prime locations are performing well in
general, many non-prime areas still appear to be
struggling with securing tenants and attracting
footfall. Nonetheless, momentum for the sector
is strong overall, and should continue improving.

Japan Retail

In fact, suburban retail properties have attracted
some attention from institutional investors dueto the higher, yet stable yields that they are able
to offer.
Elsewhere, high-end retail has also garnereda large amount of interest. Aided by a growing
number of wealthy tourists travelling to Japan,
and a number of ultra-luxury residential
developments in the pipeline, demand for luxury
retail space and products should continue to rise.
Indeed, this can be seen by the growing revenuesof high-end department stores, and more
openings of luxury brand stores. Admittedly, the“boom” that luxury brands has seen worldwide
appears to have fizzled out to some extent,with luxury good conglomerates such as LVMH
reporting revenue slowdown. Nonetheless,prospects for high-end retail in Japan look morepositive, as they are being propped up not onlyby the weakened yen, but also the improved
infrastructure and services to inbound tourists,such as more duty-free shops and better multilanguage information services. As such, this
sector should still have room to grow in Japan.
Going forward, the retail market shouldlook to continue improving with heightened
demand from inbound tourism, and with solid
domestic demand which should be supported
by strong wage growth, and hence some eager
landlords are reportedly looking to use this as anopportunity to increase rents. However, tenants
still face a multitude of cost-side pressures, withelevated raw materials prices, energy prices,and higher labour costs eating into operating
profit margins. As such, some tenants, especiallythose struggling to transfer cost increases tocustomers, are unlikely to be able to stomach
rental increments, and this discrepancy between
expectations of landlords and tenants is likely topersist. Landlords could potentially become more
selective with tenants, focusing on industries thathave greater room to pass costs onto consumers.

For more information about this report, please contact us
Savills Japan

Savills Research

Christian Mancini
CEO, Asia Pacific(Ex. Greater China)+81 3 4330 3611
cmancini@savills.co.jp

Tetsuya Kaneko
Managing Director, Head of
Research & Consultancy, Japan+81 3 4330 3103
tkaneko@savills.co.jp

Simon Smith
Regional Head of Research& Consultancy, Asia Pacific+852 2842 4573
ssmith@savills.asia

Savills plc: Savills plc is a global real estate services provider listed on the London Stock Exchange. We have an international network of more than 600 offices and associates throughout the Americas, the UK,continental Europe, Asia Pacific, Africa and the Middle East, offering a broad range of specialist advisory, management and transactional services to clients all over the world. This report is for general informative
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