These are the notable retail projects to watch out for in Tokyo

A six-storey prime retail building is expected to be completed in Q2 2026.

In a report, JLL said Tokyu Plaza Harajuku “Harakado” is due for completion in 2Q24. Located at a corner lot of the Jingumae intersection, this retail facility (GFA 20,000 sqm) is nine storeys above ground. 

“Concurrently, Tokyu Plaza Omotesando Harajuku, the existing building across the intersection, will be renamed Tokyu Plaza Omotesando ‘Omokado’ to signify the connection between the two structures,” the report said.

Here’s more from JLL:

In Omotesando, the SC Jingumae 5-Chome Commercial Project is set to commence construction in 2Q24. A retail building with six storeys above ground and a GFA of 3,500 sqm will be offered in the Prime retail market in Omotesando upon completion in 2Q26.

Demand for prime space continues from international retailers

The assessment of the consumer confidence index was revised upwards to “improving” in January, on the back of continued recovery across indices. Luxury goods sales at department stores in Tokyo continued to register strong growth (+32% y-o-y in February 2024 and +46% compared to February 2019), with sales in part supported by recovering foreign visitor arrivals (+7% compared to February 2019).

Demand for prime retail space continued from major international luxury brands in 1Q24. Notable new openings in the prime streets included Hoka at the crossing of Omotesando and Meiji-dori. Balenciaga is scheduled to open in Ginza Chuo-dori in 2Q24.

Capital values accelerate, reflecting rent growth

Average rents in Tokyo’s Prime retail market reached JPY 91,545 per tsubo, per month in 1Q24, increasing 4.0% q-o-q and 14.5% y-o-y. Rent growth accelerated, driven by ground-floor rents. Both Ginza and Omotesando continued to renew record highs, commanding a unit rent of JPY 315,000 and JPY 285,000 per tsubo, per month, respectively.

Capital values also continued to grow in 1Q24, increasing 4.6% q-o-q and 15.2% y-o-y. The increase was attributed to the healthy growth in rents, as cap rates remained stable. Notable transactions in the quarter included an acquisition by a domestic corporate of A-Flag Kotto-dori located in the fringes of Omotesando for JPY 5.0 billion and an NOI cap rate of 3.4%.

Outlook: Capital values growth might gain further momentum

According to the economic outlook provided by Oxford Economics in April 2024, private consumption for 2024 was unchanged at 0.6%. It is anticipated that consumption will gradually recover as real incomes improve, although it may be impacted by fading pent-up demand.

In the leasing market, rents are expected to grow over the next 12 months, driven by demand from international retailers on the back of the strong performance of luxury goods coupled with attractive exchange rates. In the investment market, there are signs of recovery in activity in the Prime retail market, which could place downward pressure on cap rates.

Note: Tokyo Retail refers to Tokyo's prime retail markets of Ginza and Omotesando.