No foreign tourists? No problem. Even in the absence of foreign buyers in Japan’s luxury boutiques, there is a surge in demand that raises rents in Tokyo’s most upscale areas.
Over the past three months of 2021, rates in high-profile locations in Tokyo’s high-end shopping areas have risen, the first increase since the pandemic began, according to real estate firm Cushman & Wakefield.
In the shopping areas of Tokyo returns are coming after the lifting of the state of emergency, which lasted for most of 2021. As international travel continues to be a concern for most Japanese due to long quarantine periods on return, more shoppers are now spending on luxury handbags instead of watches and fashion at home.
This helps stimulate competition for the most upscale locations between foreign luxury brands such as LVMH and Richemont as buildings are rebuilt and tenants relocate.
“It’s becoming like a war for territory,” said Isao Suga, head of retail services at Cushman & Wakefield.
Rents in the prestigious Ginza district for the three months ended in December rose 5.3 percent from a year earlier to 400,000 yen ($ 3,440) per tsubo, which in Japan is equivalent to 3.3 square meters. In Amatesanda, an elite quarter adjacent to Haradjuk and Shibuya, rose 6.7 percent to 320,000 yen per cube.
Rising demand for luxury venues has halted six consecutive quarters of declining rents since Covid first reached the shores of Japan. Only in December did the Swiss watch brand LVMH Hublot open a new store in Omotesando, and Vacheron Constantin, a member of the Richemont group, added a new store in Hindi.
In recent years, boutiques in these areas have been backed by an influx of wealthy tourists, primarily from China, who want to spend in Japan, and have contributed to favorable tax return policies. When the coronavirus outbreak first cut off Chinese tourists and then reduced physical costs in favor of online shopping, the neighborhood temporarily turned into a ghost town.
But as the world recovered from the pandemic, the demand for luxury increased worldwide. Shares of LVMH reached a record high last month, while shares of Hermes International nearly doubled in early 2020, despite relative highs.
When Japanese shoppers ventured into a lull in Covid infection, they preferred less crowded boutiques rather than department stores, said Candy Gowars, vice president of Bain & Co. in Tokyo.
Japan’s department stores are still trying to recover from the pandemic, and Seven & I Holdings Co. is going to sell its troubled network Sogo & Seibu. With declining revenues from department store placement, luxury brands were already moving to managing their own seats even before Covid, Govers added.
Rental growth applies only to a small strip of the most coveted property adjacent to the station in both areas, and Suga of Cushman & Wakefield notes that only those places that want foreign brands will benefit. “Japanese brands can’t afford these places,” he said.
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https://www.businessoffashion.com/news/global-markets/luxury-brand-turf-wars-boost-retail-rents-in-upscale-tokyo-areas/ Luxury Turf Wars brands boost retail rentals in upscale areas of Tokyo