Seoul shopping mall rents returns to pre-pandemic levels | Realestate Asia

Seoul shopping mall rents returns to pre-pandemic levels

Rents inched up 1.1% in Q1. 

Rents in Seoul shopping malls are now back to pre-pandemic levels after a 1.1% q-o-q increase in the first quarter of 2022. On the contrary, JLL says prime high street rents dropped 0.2% q-o-q. 

Myeongdong exhibited the largest decline in Seoul, eroding by 1.3% q-o-q due to bleak market sentiment. Rents in other high streets remained roughly similar quarter-on-quarter.

Here’s more from JLL:

Market yields for both shopping malls and high streets remained unchanged q-o-q, marking 5.2% and 4.6%, respectively. The most prominent transaction in the quarter was E-Mart Seongsu branch, purchased by Mirae Asset-Krafton consortium for KRW 666.2 billion (for retail portion) from E-Mart.

Consumer sentiment remains a mixed bag

Fuelled by the Omicron variant, the consumer sentiment index decreased from 104.4 in January to 103.1 in February, but it rebounded marginally to 103.2 in March. Retail sales posted 4.7% in January and contracted to 1.6% in February y-o-y. The same-department store sales surged, reading 30.4% in January and 5.6% in February. The substantial uptick in January was due to New Year’s shopping.

Overall sales also witnessed improvement backed by increased New Year’s gift purchases, especially for the F&B sector in January. In February, offline sales were held back due to a peaking of COVID-19 cases in the city taking a toll. The latest record of monthly visits of Chinese tourists went up 76.5% on a m-o-m basis, recording 16,752.

Shopping mall vacancy contracts while high street vacancy hikes

No retail assets were newly added to the JLL basket in 1Q22.

The vacancy rates of all prime shopping malls, except Times Square, observed improved occupancy. Times Square’s vacancy climbed by 44 bps. Parnas Mall returned to full occupancy, welcoming Crispy Fresh. The vacancy rates of all prime high streets went up q-o-q. Among them, Hongdae and Myeongdong witnessed the largest increase, surging by 1,013 bps and 745 bps, respectively.

Outlook: Offline retail is on a positive growth trajectory

Despite increasing daily COVID-19 cases, the government has begun to gradually lift social distancing guidelines, which will boost offline retail sales. On the back of expected relaxation of travel restrictions coupled with warmer weather, overall footfall is likely to be resilient. However, high streets are likely to witness patchy performances; some may require a longer period to recover.

While investors will still be cautious in offline retail investments, they will gauge the right time to purchase under-valued assets. Furthermore, there will be transactions for the purpose of potential value-add. Rents are speculated to grow for both high streets and shopping malls.

Note: Seoul Retail refers to Seoul's prime retail market.


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