Japan’s luxury brand boutiques are witnessing an increased demand surging rents in Tokyo’s classiest neighbourhoods.
Luxury Brand Demand Causes Surge in Rents in Tokyo
Prices in strategically prime locations in chic Tokyo shopping regions surged in the last three months of 2021, the foremost increase since the commencement of the pandemic, as per real estate services company Cushman & Wakefield.
Shoppers’ tread is making a comeback in Tokyo’s luxury brand shopping districts since the dissolution of states of emergency that was functional for most of 2021. As international travel is still an aggravation for most Japanese due to lengthy quarantine returns, more luxury brands shoppers are now expanding on luxury handbags, watches, and fashion at home through eCommerce portals instead.
The surge in eCommerce orders assists in the increased competition for the most elite locations betwixt international luxury brands like Richemont and Louis Vuitton, as edifices redevelop and tenants reposition themselves.
The head of retail services at Cushman & Wakefield, Isao Suga, stated that the competition is dubbed a turf war between luxury brands.
Rents in the upper-class Ginza district surged 5.3% in the three months ended December 2021 to JPY 400,000 (USD 3,467.86) per tsubo, a Japanese dimension equal to approximately 3.3 square meters. Buildings in Omotesando, the elite neighbourhood adjacent to Shibuya and Harajuku, increased 6.7% to JPY 320,000 (USD 2,774.29) per tsubo.
The enlarged demand for luxury locations has eliminated six straight quarters of inhibitions in rent since coronavirus first crept into the Japanese shores. In December 2021 alone, LVMH’s Swiss watch manufacturing brand Hublot unlocked a new-fangled store in Omotesando. Likewise, Vacheron Constantin (luxury watchmaker and a part of the Richemont Group) opened a new-fangled store in Ginza.
In recent times, luxury brand boutiques in these regions were maintained by an incursion of wealthy tourists, chiefly from China, enthusiastic about spending in Japan and furthered by sympathetic tax refund policies. When the COVID19 outbreak first amputated China of its tourists and then dejected physical expenditure favouring eCommerce shopping, the neighbourhoods momentarily became ghost towns.
However, as the world recuperated from the coronavirus pandemic, demand for luxury brands enhanced worldwide. Last month, the LVMH stock hit a record high, whilst stocks in Hermes International traded at close to double the level at the commencement of 2020 despite flaking recent highs.
Kenji Govaers, Vice President at Bain & Co. in Tokyo, stated that when Japanese luxury brand shoppers ventured outdoors amidst plummeting Covid infections, they preferred the less-crowded luxury brand boutiques rather than department stores.
Govaers added that Japanese department stores were still fraught with recuperating from the coronavirus pandemic. Seven & I Holdings Co. supposedly set to vend its overburdened Sogo & Seibu chain. With departmental store incomes declining, luxury brands were already creeping towards functioning in their locations even before the coronavirus pandemic.
The enhanced rents applied to merely an unimportant strip of the most necessary, station-adjoining real estate in both neighbourhoods. Isao Suga indicated that its profits were made by the locations desired by foreign luxury brands. Furthermore, Suga noted that Japanese brands could not pay for these locations.
