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Retail Meccas: Tokyo

The city has seen a flurry of store openings over the past year or so — particularly over the last few months.

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Tokyo is often touted as Asia’s most important fashion capital, and for many brands looking to expand internationally, it is the first Asian city they target. So it’s important for brands to get a foothold there to succeed in other countries and cities, despite the notoriously saturated retail market of the Japanese capital.

A case in point is Thom Browne, who chose Tokyo as the location for his brand’s second freestanding store, and first outside the U.S.

“I think it’ll definitely be important for the business here in Japan, but I think also in the rest of Asia it’s going to be important,” Browne said in March as he opened his store in the trendy Aoyama district, anchored by the Prada and Comme des Garçons flagships.

The city has seen a flurry of store openings over the past year or so — particularly over the last few months. These have centered on the key districts of Omotesando/Aoyama, Ginza and Roppongi. An OMA-designed Coach flagship and a relocated Emporio Armani store were two of the biggest openings along the main drag of Omotesando so far this year. Tommy Bahama, Nanette Lepore and Rebecca Minkoff are among the new residents in Ginza.

Alice + Olivia is preparing to open a flagship in the Omotesando area this year. “You can walk down the street and an adorable little jewel box of a store will pop up, then go around the corner and there’s something else,” said Deanna Berkeley, president of Alice + Olivia. “We’d like our first shop to have a neighborhood sensibility that’s more in line with our own stores in America.”

Renovations at the Roppongi Hills and Tokyo Midtown complexes, both in Roppongi, have welcomed new stores like Stella McCartney, Alexander McQueen, Issa and Valextra.

“Since the start of 2013, we’ve seen increased demand for retail space in Tokyo, resulting in rising rents,” said spokesman for CBRE in Tokyo. “In the near future, as fewer stores are available, we expect rents to continue to gradually increase.”

Rents in Tokyo can vary widely, even within the same neighborhood, depending on the floor and exact location on a major thoroughfare or side street.

According to CBRE, rent on prime spots on the first floor of buildings in Ginza and Omotesando run roughly from about 1,967 yen to 6,183 yen, or $19.22 to $60.42, a square foot monthly, or $230 to $725 a year.

“Generally speaking, the Japanese economy has gone through several difficult years and is now reaching a tipping point, which might give a new momentum to many business sectors, including real estate. We believe that it might make sense to take positions exactly in this moment of transition,” said Carmine Rotondaro, tax, insurance and real estate director at Kering.

Clearly, a weak yen could create some key opportunities to invest or rent properties for international retail players. Just recently, François-Henri Pinault, chief executive officer of Kering, said his company was thinking about buying a building in Tokyo, although he would not specify where.

Obviously every brand has to weigh its options carefully. Tommy Bahama decided to go the Ginza route.

Consultants told the leisure brand to focus on Ginza “if you want to make a statement in Tokyo, and you’re not just making it in Tokyo, but you’re making it to the world,” said Doug Wood, president and chief operating officer of Tommy Bahama, upon the opening of the brand’s first Japanese flagship in April. “And we looked at Omotesando, [Aoyama], and while there are definitely some great shopping areas in Tokyo specifically, there are none that hold the prestige of Ginza.”

The CBRE spokesman said Ginza is now the most in-demand neighborhood for luxury and fast-fashion brands looking for store space in Tokyo, followed by Omotesando and Shinjuku, home to Isetan department store and a slew of other shops and retail developments. Although areas like Aoyama might be cooler, he said stores in Ginza tend to sell more merchandise. Ginza is a popular shopping destination for tourists from across Asia and other parts of the world.

DEMOGRAPHICS

Population: 13.19 million (2011)
Population change: +1.5 percent from 2005 to 2011
Population projection: 13.31 million by 2015, peaking at about 13.35 million in 2020 before starting to decline
Per-capita income: 6.12 million yen, or $69,904 at average exchange for 2010
Disposable income: 5.05 million yen, or $57,625 at average exchange for 2010
Key industries: Wholesale and retail trade, hotels, eating and drinking services, construction

HOT SPOT: AOYAMA

Tokyo has many distinct shopping districts, each with its own personality. One neighborhood that has seen a lot of action over the past few months is Aoyama, located adjacent to upscale Omotesando and just a short walk from youth-fashion mecca Harajuku. Brands including Acne, Thom Browne, Maison Kitsuné and Freemans Sporting Club all recently set up shop in the area, which is home to a large concentration of residential buildings and quaint cafés.

The streets of Aoyama have a decidedly more relaxed and less-crowded feel compared with Omotesando, Harajuku and Ginza. Many stores are set on discreet side streets, inviting shoppers to lose themselves as they wander.

Brands seem to be drawn to the area’s eclectic mix of top international labels, small local boutiques and well-curated vintage stores. The appeal is not lost on François-Henri Pinault, chief executive officer of Kering, who recently revealed that his company will open Balenciaga and Saint Laurent stores near the Prada Aoyama store next year.

“Aoyama is a very trendy and sophisticated area, with a pedestrian feel, just like a European luxury avenue,” said Carmine Rotondaro, tax, insurance and real estate director for Kering. “It hosts stores of very refined designers. We found that the brand mix in the area was the perfect fit for brands like Balenciaga and Saint Laurent.”

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