Japan Retail MarketView Q1 2024

Average rents rise in seven of 10 areas,
exceeding pre-pandemic levels in Kyoto

• In Q1 2024, the vacancy rate fell q-o-q in six of the nine surveyed areas, while average rents rose in seven of 10. Average rents of Kyoto exceeded pre-pandemic levels for the first time, bringing the number of areas with rents above those prior to the pandemic to four (Ginza, Shinsaibashi, Kyoto, Kobe).
• The steepest drop in vacancy rate from the previous quarter was recorded in Shibuya, which registered a fall of -3.4 pp. as retailers from a wide range of sectors, including sporting goods and jewelry, opened new stores. The most significant rise in average rents was seen in Kyoto, which logged gains of +14.0%, as retailer appetite was stimulated by an increase in foreign tourists.
• Vacancies were filled by outdoor and sporting goods brands, fashion brands, and luxury goods brands. Appetite was particularly robust from the outdoor/sporting goods sector, with retailers looking for relatively large units in high street areas throughout the country.
• The supply-demand balance remains tight nationwide, with three areas now operating with vacancy rates below 1%. While a lack of availability is likely to slow the pace of new store openings in the coming quarters, strong leasing demand should ensure rents trend upward.