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Japan-Update

Real estate buoying earnings at Japan department store chains

Rent provides reliable revenue as retail landscape evolves

J. Front Retailing's Ginza Six opened in April.

TOKYO -- Japan's department store operators are developing their real estate businesses to stabilize revenues amid fierce competition from specialty shops and online retailers. 

Takashimaya's real estate operations are set to bring in 32%, or 11.5 billion yen ($101 million), of the company's group operating profit for this fiscal year, with the segment on track for its sixth straight record profit. The company rents out space at the Tamagawa Takashimaya shopping center and other malls through a subsidiary. Condominium sales in Yokohama are also seen making a contribution to the segment's profit. 

Takashimaya plans to lift the segment's operating profit to 15 billion yen in fiscal 2021. It will open a new building targeting specialty shops in September near its Nihombashi store, an area undergoing redevelopment.

J. Front Retailing will also see significant profit contributions from real estate operations starting this fiscal year. The company opened the Ginza Six commercial complex this past April, followed by the Ueno Frontier Tower shopping center in November. Real estate is expected to generate 2 billion yen in operating profit for the current fiscal year, with the two facilities expected to add 1.8 billion yen to the tally next year.

In April, Isetan Mitsukoshi Holdings will open a commercial facility housing 50 specialty shops in the Kokubunji area of Tokyo. H2O Retailing, the parent of Hankyu Hanshin Department Stores, will lend support to supermarket subsidiary Izumiya's commercial leasing business.

Despite brisk sales from wealthy customers and overseas visitors in such major cities as Tokyo and Osaka, department store operators continue to see regional locations struggle. "Efforts to lure tenants are likely to continue since department stores still have a lot of retail space with lackluster earnings," explained Kazunori Tsuda of Daiwa Securities.

(Nikkei)

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