Seoul retail vacancy rates decline except in Gangnam and Myeongdong

The vacancy rate in Gangnam was at 36.1% in Q4 2021.

According to JLL, the vacancy rate of Seoul’s High Streets was about 28.3%, up 103bps from the previous quarter. In each district, all vacancy rates in districts tracked by JLL faltered, except in Gangnamdaero and Myeongdong HS. The vacancy rate of Gangnamdaero was 36.1% and this is the highest since JLL began tracking such rates. The figure has been affected by the leaving of Under Armour and Frisbee. 

“Hongdae, which showed the highest increase in vacancy rate last quarter, dropped 4.9%p, aided by NIKE opening a new store. Vacancies in Cheongdam and Garosu-gil also decreased 2.2%p and 0.6%p, to 22.2% and 28.2%, on a q-o-q basis, respectively. Myeongdong stayed flat, recording 20.7% y-o-y. However, the district is still grappling with the lack of overseas tourists,” the analyst added.

Here’s more from JLL:

The vacancy rate for shopping malls was around 3.7%, down 9bps from the previous quarter. As Time Stream (formerly known as Podo Mall), which recently underwent refurbishment, reopened with halved vacancy compared to the previous quarter. The vacancy rate of Noon Square and Lotte World Mall saw an uptick due to the lack of take-up of vacant spaces, which have been created by existing tenants moving out. 

The occupancy of Parnas Mall, COEX Mall and IFC Mall improved over the quarter. Notably, Parnas Mall’s vacancy plummeted by 805bps q-o-q. Its vacancy rate spiked from 0.0% to 9.8% in 3Q21 but was moderated in 4Q21.

Rental growth in High Streets continued to slow. 

Rents for shopping malls marginally increased by 0.6% on a q-o-q basis, recording rents above pre-COVID levels, whilst High Streets rents stayed flat from the previous quarter. Amongst High Streets, rents of Myeongdong fell 1.0% q-o-q, the largest quarterly decrease in Seoul. It indicates that the district is still struggling with COVID-19, as it was a district which targeted foreign tourists. 

On the other hand, rents in Cheongdam and Hongdae rose 1.0% q-o-q, as global luxury brands such as Van Cleef & Arpels and Fendi, plus Freitag, the upcycling fashion brand, launched flagship stores. 

In 4Q21, the retail investment market reached about KRW 1.5 trillion. The quarter’s most notable deal was Mirae-Lotte Engineering & Construction-IBK Securities Consortium purchasing 5 branches, Homeplus Buksuwon, Gimhae, Dongdaemun, Gimpo and Gajwa from Ryukyung PSG Asset Management. Considering the locations of the properties, the purchaser, IBK Securities, is expected to make profits by conversion to other uses.