Mitsubishi Estate Expects Record Sales From Retail Space

Mitsubishi Estate Co. (8802), Japan’s largest developer by value, said revenue generated from its retail space will probably reach a record this fiscal year as it expands to benefit from an expected increase in consumption.

Rental income from tenants of Mitsubishi Estate’s retail space will rise to about 560 billion yen ($5.6 billion) in the year ending March 2014, said Masaaki Kono, director and executive vice president of the Tokyo-based company. That would be an 18 percent increase from an estimate of 475.5 billion yen for last fiscal year just ended in March, he said. Rents account for about 10 to 15 percent of store sales, Kono said.

Mitsubishi Estate has accelerated developing shopping malls and outlets in recent years to close gap with its competitor Mitsui Fudosan Co. (8801) amid a shift in demand as department store sales have declined for more than a decade. Mitsubishi Estate is opening three retail facilities in Chiba and Shizuoka prefectures near Tokyo, and Osaka in April, the most ever in a month, bringing total number of retail assets to 28, Kono said.

“We have been working really hard to catch up in the past five, six years with Mitsui Fudosan,” Kono said in an interview in Tokyo on April 22. “We will probably focus more on quality than quantity from now on.”

Source: Mitsubishi Estate Co. via Bloomberg

The Mark Is Shizuoka developed by Mitsubishi Estate Co. in Shizuoka, Japan. Close

The Mark Is Shizuoka developed by Mitsubishi Estate Co. in Shizuoka, Japan.

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Source: Mitsubishi Estate Co. via Bloomberg

The Mark Is Shizuoka developed by Mitsubishi Estate Co. in Shizuoka, Japan.

Mitsubishi Estate rose for the first time in three days, gaining 1.9 percent to 3,150 yen at the close of trading in Tokyo. The stock has surged 54 percent this year, compared with the 63 percent advance by the 44-member Topix Real Estate Index.

Prime Space

Rents for prime retail space in Tokyo is the second-most expensive in Asia at $975 per square foot per year, according to Los Angeles-based property broker CBRE Group Inc. (CBG) Hong Kong which charges the most retail rent ranked at top with $4,335 per square foot per year, it said.

The total store space owned and managed by Mitsubishi Estate reached 200,000 tsubo (661,160 square meters) this month after the opening of two retail facilities, Kono said. One tsubo, a standard measure of property area in Japan, is 3.3 square meters, or 35.5 square feet.

That is less than half of 1.77 million square meters (19 million square feet) of commercial space Mitsui Fudosan owns or manages, based on data compiled by the company. Mitsui Fudosan generated 736 billion yen of sales from retail space as of March 2012, according to the company.

Mitsubishi Estate opened a shopping mall in Shizuoka prefecture, west of Tokyo, on April 12, targeting customers in their 30s with family, the company said. The mall, first of its kind under Mark Is brand, has 36,000 square meters of store space that provides wider hall way and resting space for small children and elderly, it said.

‘Lifestyle Changes’

“With the lifestyle changes as population ages and fewer children are been born, retail properties can’t survive if they don’t adjust accordingly,” Kono said.

A week after the opening of the mall in Shizuoka, the developer unveiled its ninth outlet with 21,700 square meters of store space in Chiba prefecture, east of Tokyo. The outlet, located 10 minutes by bus from Narita Airport, is targeting Asian travelers in addition to Japanese shoppers, it said.

Mitsui Fudosan, also based in Tokyo, is expecting its full- year profit to rise for the first time in four years as new shopping malls such as Mitsui Outlet Park Kisarazu and DiverCity opened during the reporting period that ended March, contributing to leasing revenue.

Twelve companies including Mitsubishi Estate on April 26 will open Grand Front Osaka, a joint project with 44,000 square meters of store space including a 600-seat beer and wine museums where more than 450 types of alcoholic drinks will be served.

“It used to be typical for shopping centers to just sell apparels,” said Kono. “Instead of that, we want to create a place where people can get together and have fun.”

To contact the reporters on this story: Kathleen Chu in Tokyo at kchu2@bloomberg.net; Katsuyo Kuwako in Tokyo at kkuwako@bloomberg.net

To contact the editor responsible for this story: Tomoko Yamazaki in Singapore at tyamazaki@bloomberg.net

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