Despite tight labour markets in construction and retail which led Aeon and others to halve the number of planned SCs this year, 2015 looks like being another strong year for new shopping malls, both in suburban and city centre locations, with Nagoya a particular focus for investment.
2015 looks set to be another strong year for new SCs according to research by the Japan Shopping Centre Council (JCSC). The JCSC says it expects 52 new SCs this year. Although this is fewer than the 65 new SCs in 2013 and 55 in 2014, the growth comes in the face of considerable pressures on construction caused by higher wages and the significant paucity of labour. The latter has already led several major developers like Aeon and Seven & I to curtail some development plans – Aeon alone slashed new SC plans by half for this year, although it may revert to form again soon (see Page 8). Nevertheless as in previous years, Aeon and Mitsui Fudosan are building the most new SCs.
Aeon has five major malls on the way including the upcoming 78,000 sqm Okinawa SC, and others in Asahigawa in Hokkaido, and several in Aichi and Osaka, with all except Asahigawa in excess of 50,000 sqm. Similarly Mitsui plans at least six major SCs this year, up from just one last year, such as Lalaports in Fujimi (80,000 sqm and 300 tenants), Ebina (55,000 sqm), Tachikawa (60,000 sqm), and another huge 90,000 sqm SC in Osaka.
Fujimi Lalaport is being billed as presenting Mitsui’s latest thinking on SC management; this means a more diverse array of tenants, more services, in-store entertainment, events and open space – there will even be a BBQ area and an allotment space to try out gardening and farming. Since it is just a 30 minute train ride from Ikebukuro on the Tobu line, Fujimi is even expected to impact sales at Ikebukuro station. Mitsui will also open Harajuku Alta, a new joint project with Isetan-Mitsukoshi to target teens and young women.
The JRs, not just JR East, are increasing retail investment significantly. Highlights include new developments at Toyama and Kanazawa stations in Hokuriku to celebrate the connection to the shinkansen network this month, Urawa in Saitama, and Oita in Kyushu – the latter will get a 31,000 sqm Amu Plaza SC which is likely to hit local retailers hard.
What is notable about many of the developments this year and last is the increasing focus on large city SCs and/or tourist locations such as Aeon Mall Okayama and its upcoming Okinawa SC. Tokyu Corp remains particularly active in this regard, with new SCs due in Futako Tamagawa, Jingumae, and a 120 tenant, 21,000 sqm SC in Ginza 5-chome. Parco is also investing again, notably in Nagoya and Fukuoka.
By city, one of the main targets for investment is the station area of Nagoya. It has emerged as a major rival to Sakae, the traditional city centre, ever since the opening of JR Takashimaya in 2000, but there is now plenty of new hype surrounding the opening of the first Linear Railway between Tokyo and Nagoya in 2027. This will mean a journey time of just 40 minutes, and there is already talk of Nagoya becoming a new commuter town for Tokyo despite the high cost of the train ride and, more realistically, as a choice for relocation of corporate headquarters given the lower costs.
Either way it will undoubtedly become a hub for connecting trains from the Linear Line and this is encouraging several new developments. These include Dai Nagoya Building, JR Gate Tower and JP Tower Nagoya. Dai Nagoya will open March 2016 with 80 tenants anchored by a 3,000 sqm Isetan select shop, the first of its kind. In 2017 JR Gate Tower will open with a 30,000 sqm annex for Takashimaya called, reassuringly, Takashimaya Gate Mall Tower.
The impact of SC development and the shift to specialty retailing has already hit local department store performance. Apart from JR Takashimaya, most department stores have seen a dramatic fall in sales densities. At their peak in 1991, Nagoya stores enjoyed annual sales densities of ¥2.33 million per sqm but these had fallen to a mere ¥350,000 per sqm in 2012. JR Takashimaya’s performance shows that this was not entirely inevitable, although excess capacity didn’t help. JR Takashimaya opened in 2000 with first year sales of ¥60 billion, but today sales are double that, at ¥120 billion, despite the fact that space has barely changed from the original 67,000 sqm.
The spate of SC development in Japan is all the more remarkable given the already high levels of competition in key areas and the fact that there are already nearly 3,200 SCs, but developers see no alternative than to build afresh rather than take over and refurbish existing malls that may have designs and locations that are suboptimal for today’s consumer needs and demand.
Last year SC sales in Japan rose 2.9% to ¥29.8 trillion according to estimates from the JCSC, accounting for around 21% of Japanese retail sales. Sales were boosted particularly by the shopping spree in March when sales at SCs rose 11%. Sales actually fell year on year in April to July, October and December. By region sales rose in Kanto, Kyushu/Okinawa but fell in all other regions.
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