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Re-Shaping for Millennials &

Re-Shaping for Millennials &

A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION

RE-SHAPING FOR MILLENNIALS &

SEPTEMBER 2018 TABLE OF PRIME RETAIL MARKETS ACROSS · · · · · · · · · · Retailers take oncommunity-oriented hotel concept Mass merchandise shopsboosting rents inOsaka revitalized by new Japaneseflagships turninginto tourist hub secondhand retail New consumers redefining thephysical store for “Sephorization” isvitalto today’s buyers seek shops Omotesando home to soaringrents andhide-and- Luxury brands seekingoutmillenials madealeapforward redefining entertainment 17 16 15 14 13 11 10 7 6 5 PRIME RETAIL MARKETS inbound tourism. rise ofMillennialsand significance ofthe change istheincreasing What’s behindthis this year’s rent ranking. is shiftingasevident on Japan’s retail landscape

MAIN STREET Sendai, Miyagi Futakotamagawa, Sapporo, Hokkaido Jiyugaoka, Tokyo Daikanyama, Tokyo Tenjin, Fukuoka Meieki (Nagoya Station), Nagoya , Tokyo , Tokyo Sakae, Nagoya Shijo Dori,Kyoto Kichijoji, Tokyo , , Tokyo , Shibuya, Tokyo Shinsaibashisuji/Midosuji, Osaka /Omotesando/Aoyama, Tokyo Shinjuku, Tokyo Ginza, Tokyo AREA JPY/TSUBO/MO

TIER 1 19 18 16 11 11 9 8 6 3 2 Q2 2018 19 16 11 11 11 9 6 5 3 1

SANNOMIYA TIER 2 16 15 13 - 10 - - 6 4 3 2017 16 13 12 10 9 8 6 5 2 1 TIER 3 15 17 14 - 12 - - 8 5 2 2016 15 12 8 8 8 6 6 4 2 1 60,000 75,000 80,000 100,000 100,000 120,000 140,000 150,000 300,000 320,000 JPY/TSUBO/MO 60,000 80,000 100,000 100,000 100,000 120,000 150,000 200,000 300,000 400,000

TENJIN A CUSHMAN&WAKEFIELD RESEARCH PUBLICATION 183 229 244 305 305 366 427 457 915 976 USD/SF/YR 183 244 305 305 305 366 457 610 915 1,220 4

A CUSHMAN & WAKEFIELD RESEARCH PUBLICATION

HIBIYA SHINJUKU entertainment leap forward

MIDTOWN HIBIYA opened Japan for the first time. The center Shinjuku’s prime retail rents rose conducting workshops and events. SHINJUKU’S WELCOMES beside the beautiful , is connected via an underground 14.8% over the last 12 months, due Shinjuku used to be a place that PRIME RETAIL between Marunouchi and Ginza, food hall to , in to continued demand from retailers. people passed through, but visitors RENTS ROSE in March 2018. Within two months keeping with the recent F&B The increase placed Shinjuku now see it as a place to enjoy of opening, more than 4 million trend. Hibiya is now a business ahead of Omotesando, Harajuku, new experiences. More street-side people had visited the building, district that used to be an area Aoyama, and , as the retailers will open on Shinjuku-dori, casting aside any doubt about where diplomats gathered to second most expensive prime retail between Shinjuku Station and the MORE VISITORS whether it would reach its annual socialize which symbolized the area in Japan. Shinjuku had long Shinjuku 3-chome intersection, THAN TARGETED target of 12 million people at a modernization of Japan. The area been in fierce competition with which is expected to further OVER THE LAST faster pace. More than half of the was home to the magnificent Omotesando, overtaking it for the boost rents in the area. Retailers 12 MONTHS tenants are cafes and restaurants, Imperial Hotel, designed by first time ever. relocating from older buildings into including ones that are opening in American architect Frank Lloyd the newly constructed buildings Wright, and many cultural facilities Shinjuku has always been in such as Gucci will also help such as existed until demand among retailers, but revitalize the area. In addition, the mid 20th century. The neighboring traditionally it was home to a future redevelopment of building retail facility, Hibiya Chanter, also “melting pot” of all kinds of clusters adjacent to Shinjuku underwent large-scale renewal shops. However, more recently Station will further strengthen the to coincide with the opening of community oriented retailers that retail scene of the world’s busiest Midtown Hibiya. These changes focus on customer experiences and station. led to a 70% increase in visitors interactions have begun gathering to the renewed facility compared in the area. For example, Apple to a year ago, contributing to a opened a shop in Shinjuku focusing flourishing atmosphere. In addition, on this concept in April 2018. a new development project Community-oriented stores are initiative has already begun.

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Luxury brands

MILLENNIALS Naoko Hongo Masahiro Tanaka

Luxury retailers are launched a pop- TURNING TO LUXURY STREET For example, Balenciaga has up store at the former GAP E-COMMERCE WINNING YOUNG appointed Demna Gvasalia, redefining their brand image site in Shibuya during Golden PLATFORMS CONSUMERS co-founder of Vetements, to Week. It offered a limited edition PLATFORMS take the creative lead at the by hiring new designers who collection in a pop-up section, a The strategic development of fashion house. Leading street are well recognized in men’s floor for retail, and a second floor luxury e-commerce platforms The “Luxury Street” is well brands are also on the cusp of devoted to Millennials, with digital has been remarkable. Luxury known for offering a mix of joining the mainstream fashion street fashion. This vital installation tools to grab attention. brands used to focus on high luxury brands and streetwear. industry. Brands that were, until move together with a focus Millennial consumers value street retail and private online Many popular collaborations recently, only popular among Instagrammable experiences they stores. But they have recently have been introduced at pop-up skaters – such as Supreme, on digital communication is can share, and Luis Vuitton’s shop been expanding on Farfetch, events, which have developed Stussy, A Bathing Ape, and created waves within two weeks, a global online shopping mall into a social phenomenon. Palace Skateboards – are

WHAT’S NEXT WHAT’S to attract Millenials. Retailers uccessfully using these elements. for designer clothes. The Successful collaborations now extending their reach as are turning to short-term partnership includes Gucci’s include those between Jimmy many Hollywood celebrities, Inclusive experiences, and surprise 90-minute delivery service in 10 Choo and Off-White, and fashionistas, and social media pop-up stores - in addition & discovery elements, stimulate cities globally, Burberry’s use of Louis Vuitton and Supreme. influencers become fans of to permanent shops - for buying intent. Shopping centers the Farfetch platform to allow Their popularity is exploding the brands. These brands and retailers are blurring the lines customers to check inventory among Millennials and post- stimulate sales by opening the launch of new collection between offline and online. The and buy online, and Chanel’s Millennial Generation Z. Luxury short-term pop-up stores that concept of “shopping” is no longer collaboration to develop digital Street incorporates elements offer a limited number of items. with limited items to just about buying products. It is content for Millennials. This of street culture into the luxury It is common to see queues boost sales and maintain also about researching products trend signifies luxury brands’ look, such as sneakers, large snaking in front of these stores, by communicating with store staff evolving approach to reach hoodies, and logo items. The sometimes overnight. There is relevance. – not just through shop visits but out to new generations of “Neo Street” movement, based no doubt that pop-up stores will through social networking sites – fashionistas while nurturing on monochromatic themes, is become mainstream for many to collect information about the brand heritage. also very popular. Many of these luxury street brands. merchandise they are seeking. designers have carved out a unique niche away from the mainstream.

Then there is the new breed of designers who wear a variety of creative and career hats, such as DJ, who are referred to as WELL KNOWN “slashers.”. It is said that Marcelo FOR OFFERING A Burlon was one of the first of MIX OF LUXURY its kind. They are constantly BRANDS AND looking beyond fashion to STREETWEAR identify cultural links in activities such as sports and music. Some of these designers have recently been recognized by the big fashion houses and roped into design collaborations.

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OMOTESANDO And Hide-and-Seek Shops

From Harajuku to Omotesando, SEVERAL in addition to Korean natural REDEVELOPMENT cosmetics retailers, domestic PLANS ARE sneaker stores have opened. This UNDERWAY reflects increased acceptance for LOOKING AT THE relaxed dress code in Japan and inbound tourists favoring these brands. Several redevelopments are underway around Harajuku Station, ahead of the 2020 Summer Olympics. A well- OLYMPICS known public residential block GAMES in Aoyama will be redeveloped as a mixed-use site, in addition to other redevelopments that are improving the convenience of Omotesando Station. Strong demand is continuing for branding showrooms from Omotesando to Aoyama. However, the current high rents are deterring some retailers from opening. In main streets such as Meiji-dori and Omotesando, after tenants depart, sites are standing empty due to soaring rents. In addition, an increasing number of street brands are looking for “hide-and-seek” locations that customers enjoy discovering.

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“Sephorization”

COSMETICS BUYERS Yurie Niino

The beauty industry’s reported a 25% increase capability, allowing them to test efforts are minimal, largely THE BRAND’S in buyer penetration and a 32% different lighting, make-up, and hair consisting of Jenner’s Instagram SUCCESS expansion is not limited increase in regular buyer purchases colors. Modiface is now working account. ILLUSTRATES in 2014, when it launched a new with L΄Oréal, Estée Lauder and to department stores. It concept, Teach, Inspire, Play (TIP), Sephora to install mirrors in stores As the beauty industry attempts has extended to options in San Francisco. TIP features in- that augment changes in makeup to integrate technology and social store education centers equipped and hair. ModiFace Chief Executive media, brands may open more for freestanding locations. with iPads, USB ports and Wi-Fi, Officer Parham Aarabi says the freestanding locations where Consumers want to try as well as makeover and skincare technology will revolutionize the they can offer better customer stations, where consumers are beauty industry. experiences. For example, Chanel THE WAY THAT before they buy and helped to achieve a chosen look. created a four-day experience in MILLENNIALS Ultra had also a 41% increase in AD DOLLERS Los Angeles, called the Chanel ARE REWRITING WHAT’S NEXT WHAT’S retailers are listening by regular buyer purchases with this GO ONLINE Beauty House, as part of the launch THE RULES. experiential concept. of its Instagram page @welovecoco offering more samples and The brand’s success illustrates in March 2018. @welovecoco is bringing products out onto In a similar vein, Jo Malone has the way that Millennials, who dedicated to user-generated launched a new brand, Jo Loves, may spend hours on social media content featuring Chanel products. shelves, not placing them in addition to the line that bears platforms watching video bloggers Users can tag the page and use behind counters, in a trend her name. Her new line is informed and influencers, are rewriting the the hashtag #welovecoco to create by consumers’ attitudes toward rules. And brands are racing to attractive content for other users to dubbed “Sephorization” food, not beauty, she says. She has evolve with the fast-changing discover. The Chanel Beauty House created a new retail experience, market. Cosmetic companies are provided an immersive experience after the beauty store chain. called Fragrance Tapas, in which shifting ad dollars from traditional for visitors – and helped Chanel consumers order four “courses” television and print platforms to achieve more than 3 million of fragrances. “We are creating Instagram and YouTube. These social media impressions for together and the customers see social media platforms allow the #welovecoco hashtag. the brand for the first time,” she people to review products, Although Japan is still says. This new retail experience, making recommendations to relatively new to such presented in an experimental store, friends, colleagues, or family strategies, they will has increased sales. members. Influencers also have a become a norm in tremendous social media presence. near future. AUGMENTED REALITY For example, Kylie Cosmetics, FOR “TRY-ON“ the online retailer established by 21-year-old Kylie Jenner, racked up ModiFace is an augmented reality more than US$420 million in sales app that gives users a “try-on” in just 18 months. Its advertising

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GINZA New consumers redefining

SECOND-HAND RETAIL Songshin Ko tourist hub

Digital technologies and Ginza is poised for transformation dori is now drawing a broader DIGITAL APPRAISED demographic shifts have led to the – from “tourist destination” to range of shoppers from Chuo-dori. LAND VALUES TECHNOLOGIES rise of secondhand retail. Today’s “tourist hub.” Ongoing hotel Leading brands located on Namiki- AND NEAR THE young consumers are more willing developments and mixed dori include Chanel, which has INTERSECTION DEMOGRAPHIC to go for secondhand products. use projects are fueling this renewed its Ginza Namiki Street SHIFTS HAVE OF CHUO-DORI Driven by the proliferation of flea transformation, uniting retailers and shop, and Louis Vuitton, which is AND HARUMI- LED TO THE market apps on mobile devices, boutique and luxury hotels along rebuilding its shop on the same RISE OF DORI HAVE consumers are considering a the high streets. The Hyatt Centric street. These retailers are all part of BEEN GROWING SECONDHAND product’s resale potential before Ginza Tokyo opened in January the movement that is contributing RETAIL. FOR THE PAST even deciding whether to buy. 2018 and the luxury shopping to the restoration of the area. THREE YEARS, Following this trend, leading reuse center GINZA SIX opened last Appraised land values near the ACHIEVING TODAY’S YOUNG retailers Komehyo and Geo have year – all part of the shift. Ginza’s intersection of Chuo-dori and CONSUMERS ARE not only opened online stores tourist bus station and service Harumi-dori have been growing MORE WILLING but also joined ZOZOUSED, centers have been made more for the past three years, achieving TO GO FOR Japan’s leading online platform convenient for visitors, attracting 9.9% growth this year. This trend SECONDHAND for secondhand fashion. In people to the eastern area of Ginza. will help maintain the current high PRODUCTS addition, Komehyo has built a new The pedestrian flow has also been rents for prime retail sites on the GROWTH THIS system integrating e-commerce improved, which has had a spillover main streets. YEAR and its existing physical outlets effect on the northern side of so that customers can examine the district. Traditionally, affluent merchandise before buying. Japanese shoppers have headed to Although flea market apps are Namiki-dori, which runs parallel to handy for buying and selling used Chuo-dori, the main thoroughfare products, some people prefer to go running through Ginza. But Namiki- to a physical store to sell multiple used items at once – turning them into pick-up and drop-off points.

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SHIBUYA MASS new Japanese flagships boosting rent in Osaka

SPORTS BRANDS Shibuya is still in a transitional are still ongoing. Second, Adastria’s In Shinsaibashi, rents have convenience stores. Drugstores IN SHINSAIBASHI, TARGETING phase as it is going through a major “Global Work” opened their first increased 20% over the last 12 are opening in areas popular with RENTS HAVE update with ongoing large-scale standalone store on Inokashira months and 100% since the first inbound tourists, which is boosting INCREASED redevelopment projects; however, Koen Dori Avenue, which marks quarter of 2016, driven by the market rents. One drugstore the city is gradually revealing its a leap forward from their usual growth in inbound tourist numbers. secured a great location vacated new appearance. As the city has suburban shopping mall expansion As a result, Shinsaibashi has by a fast fashion store in the widely been popular among young strategy. Despite retailers’ high emerged among the third most Shinsaibashi area. Shinsaibashi will OLYMPIC generations both domestically and demand in the area, apparel expensive areas for prime retail remain active – GAP’s relocated GAMES overseas, it is becoming a focus of companies are still in a wait & see rents, in line with the Omotesando, flagship store is due to open in OVER THE LAST new openings by instagrammable position, especially waiting to see Harajuku, and Aoyama areas. late 2018. Construction of 12 MONTHS ARE ALSO known concept hotels, cafes and the magnitude of the new retail Inbound tourists are boosting Shinsaibashi’s main building has AND 100% PASSIONATE TO fast food shops targeting single facilities opening in 2019. On the the financial performance of also been completed. In Umeda, TAKE UP SPACE people and young professionals. contrary, drug stores, mobile & department stores and other retail redevelopment plans are underway SINCE THE FIRST Sports brands targeting the gadgets shops continue to show shops in this area of Osaka. Kansai in the north and south of the QUARTER OF 2020 Olympic Games are also strong appetite seeking any International Airport Terminal 2 was Umeda station. The Yodobashi 2016 passionate to take up space. opening opportunities. Also office expanded in January 2017, making Umeda Tower is due to open in Although Shibuya’s prime area has agglomeration of tech companies is it more convenient for travelers, 2019, which will also improve the long been taken by international becoming evident, such as Google’s which has increased the number pedestrian flow on the north side retailers due to its high rent, two head quarter relocation and of repeat gourmet and shopping of the station. This booming market major Japanese apparel companies this office worker expansion will tourists from Korea and . In will continue, and businesses, have seized flagship locations reinforce Shibuya’s retail market. addition, of the 60% of tourists who including capsule and budget with their popular brands in return to Japan (Japan National hotels, are even leasing properties this quarter. First, it was Stripe Tourism Organization, 2017), that are slightly away from the International’s Hotel Koé Tokyo consumer tastes are shifting from downtown area. which comprises of café/restaurant, luxury goods to mass merchandise retail and hotel components. items (confectionery, beverages, Located at Koen Dori Avenue, Koé liquor, tobacco, health products, has successfully brought energy and medical supplies). Destinations back in the neighborhood where extend beyond airport duty-free redevelopment construction works stores to include drugstores and

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Retailers take on

HOTEL CONCEPT Isao Suga Tatsuya Watanabe

Developers are building With the Japanese government TRUNK (HOTEL) HOTEL KOÉ MUJI HOTEL ACE HOTEL setting its sights on an annual SHIBUYA SHIBUYA GINZA KYOTO hotels in cities such as 40 million visitors, the domestic Tokyo, Osaka, and Kyoto, hotel market, including vacation Take and Give. Needs Stripe International Ryohin Keikaku Co. Leading American rentals, is becoming highly Co., Ltd., one of the Inc., a major Japanese plans to open Japan’s boutique hotel chain in anticipation of the 2020 competitive. The large supply leading wedding apparel company, first Muji Hotel, in Ace Hotel opened for influx of hotels is making brand companies, opened opened Hotel Koé Ginza, in spring 2019. business in Japan in Summer Olympics in Tokyo. differentiation key, and art and TRUNK (Hotel), located Tokyo in February 2018. The company is late 2019, Ace Hotel, Now hotels are seeking comfort are assuming the same off Shibuya’s iconic It has a cafe restaurant overseeing the process headquartered in importance as price-point. So it is Cat Street in May 2017. and event space on the from concept to fit- Portland, USA, will ways to provide unique fortunate that international hotel The trendsetter hotel ground floor, apparel out, ensuring it meets finally expand to Japan, brands are planning to expand in is garnering positive store on the second the minimalist ethic in partnership with NTT

WHAT’S NEXT WHAT’S and quality experiences. Japan at a time when domestic reviews from European floor, and hotel rooms that epitomizes the Urban Development The developers leading this apparel companies are focusing and North American on the third floor. Muji brand. The first Corporation. Their first more on creating communities. guests. Focusing on The hotel provides an Muji hotel opened in location is in Kyoto’s trend come from outside Collaboration is expected to environment, location, alternative showcase Shenzhen, China, in Shinpukan building, the traditional hospitality accelerate as their retail concepts diversity, wellbeing, for the brand. It offers January 2018. which had been a provide holistic cultural experiences and culture as key a lifestyle concept shopping mall for 15 industry, bringing new that satisfy the expectations of concepts, the hotel revolving around years. Ace Hotel is one perspectives to the market. customers from all walks of life, promotes itself as a “stay, fashion, music, of the leading boutique while providing large public spaces place for socializing. and food.” Hotel Koé hotel operators whose to respond to the Millennials’ In its owner’s words, also experiments with unique hotel concept craving for social connectivity. “to live true to yourself new retail technology has won the acclaim without undue pressure such as a self-service of trend-sensitive The fusion of hospitality and while having life sized checkout system. travelers from around fashion is a logical outcome. social purpose.” The the world. Renowned Fashion brings the flair, while hotel represents a new architect Kengo Kuma hospitality brings the expertise in hotel trend, moving will blend history areas such as health and safety away from the image of with modernity when regulations, emergency procedures an elitist social hub to redeveloping the early and developing sustainable one that embraces an 20th century red brick business models. inclusive community. building – renovated As evidence of this, by Sir Richard Rogers the ground floor in 2001 – which will lounge fills with nomad include retail tenants in workers armed with the development. laptops each morning.

18 For inquiries please contact:

Isao Suga Hideaki Suzuki, PhD FRICS Head of Retail Services, Japan Head of Research, Japan +81 3 3596 7033 +81 3 3596 7804 [email protected] [email protected]

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