Seoul shopping mall rents down 2.3% in Q1

High street rents still saw a slight growth during the quarter.

According to a JLL report, shopping Mall (SM) rents fell by 2.3% q-o-q as One Grove, in Magok with relatively lower rent, was added to the stock. High Street (HS) rents increased slightly by 0.2% q-o-q. Among High Streets, only Garosu-gil saw a rent drop due to high vacancy and a lack of footfall.

“The most notable transaction was One Grove (CP4), a mixed-use property, where IGIS Asset Management acquired the retail portion for circa KRW 537 billion, with NPS,” the report added.

Here’s more from JLL:

One Grove in Magok, with a NLA of approximately 39,000 sqm, was completed in the quarter. No new prime shopping malls are expected to come on stream for the next few years, at least.

SM vacancy rate rose to 5.0%, up 408 bps q-o-q, mainly due to the new One Grove in Magok, with over half its space still vacant. HS vacancy rate increased 36 bps to 16.4%, with rises in Myeongdong and Gangnam due to the departures of Supra and Chicor, respectively.

Outlook: Investor reluctance towards retail properties is likely to lead to consistently slow deal flow in the sector

The subpar performance of some major hypermarkets and sales withdrawals could affect the performance of related funds and REITs. Disposition will be challenging without clear redevelopment potential, likely deterring investors from retail assets in the short-term.

To attract foreign tourists, big-box retailers are expected to expand in Myeongdong via flagship stores and targeted promotions. Major operators, such as Lotte and Shinsegae, are also renovating their Myeongdong stores, boosting expectations for the area.