- In 2H/2022, average 1F rents in Tokyo have seen slight dips. However, this was partly due to a decline in the number of prime units listed, as they appear to have been taken up, and the overall market has seen a gradual decline in vacancies.
- In regional markets, average 1F rents have also seen a decline, which reflected a similar situation to that of Tokyo, and demonstrates increasing demand.
- Transaction volumes in 2022 have surpassed those of 2021 by almost 10%, and more deals in the retail sector are expected. The sector will likely attract more investors in this environment of elevated inflation and interest rates.
- While the luxury, discount, and daily essentials sectors are performing well and are expected to continue doing so, mid-market retail is expected to take longer to recover.
- Although Japan has transitioned to a post-pandemic state, office attendance and the consequent footfall in central business districts still lag pre-pandemic levels, which will impact the wider retail market.
- The effects of lifestyle changes and paradigm shifts that occurred during the pandemic, such as an expansion in online shopping, will likely linger, and retailers will need to continue adapting to these changes.
- Inbound tourism has made a robust comeback, which will provide a significant boost to related sectors.
Market rapidly recovering but with road bumps ahead
Japan has progressed to a post-pandemic state, with domestic demand and inbound tourism making a strong comeback. While this will certainly mean improvement for the overall retail sector, there are road bumps including the inflationary environment and a shortage of labour that will have an adverse impact, especially on mid-market retail which may take longer to recover. Nonetheless, retail assets will benefit from increasing popularity due to their rental prospects.
Savills Research & Consultancy