Seoul’s shopping mall rents up 2.4% in Q2
Prime high street rents slipped 0.3% in the same period.
Seoul’s shopping malls have been seeing an increase in footfall and sales, thereby causing rents to inch up 2.4% in 2Q21. Meanwhile, JLL says prime high street rents decreased marginally by 0.3% q-o-q as high street retailers face more challenges than shopping malls.
“Investment yields for both shopping malls and high streets increased by 10 bps q-o-q, recording 4.95% and 4.38% respectively, exerting downward pressure on capital values. Notable transactions in the quarter were E-Mart Gayang trading at KRW 682 billion from E-Mart to Hana Alternative Investment PFV and Homeplus Gaya Branch selling to MDM Real Estate Group from MBK Partners for KRW 351 billion,” adds JLL.
Here’s more from JLL:
Consumer sentiment index rebounds to pre-COVID-19 level
The consumer sentiment index is starting to revitalise showing steady increases for five consecutive months, reaching 102.2 in April, 105.3 in May and 110.3 in July. Retail sales continued to post positive figures, marking 11.1% in March, 8.7% in April and 3.1% in May on a y-o-y basis. Department store sales remained upbeat after reaching its peak in March.
Same-department sales growth went up 80.7% in March, 36.9% in April and 17.1% in May. The sales of all product lines have decreased except for household products, as people spend more time at home due to the prolonged trend of social distancing and WFH policy. The latest monthly record of Chinese tourist arrivals more than doubled on a y-o-y basis, recording 14,221.
Shopping mall and high street vacancy rates contract in Gangnam
No new retail assets were added to the stock in 2Q21.
Vacancy rate of shopping malls located in Gangnam district, including COEX Mall, Parnas Mall and Lotte World Mall, contracted while the vacancy rates of Noon Square and Podo Mall lifted. Likewise, the vacancy rate of high streets in Gangnam area, such as Garosu-gil and Gangnamdaero, went down while that of other high streets surged over the quarter.
Outlook: Offline retail remains volatile despite economic recovery
While the economic outlook finally turned positive, there are lingering market challenges which could hinder rent growth. Improvement in consumer sentiment still largely relies on domestic footfall, which implies tourist locations such as Myeongdong may need more time to witness recovery.
There will likely be more hypermarket sales transactions closing as key players are actively disposing of underperforming assets to improve liquidity. Despite the potential adjustment in interest rates, there may be additional value-add strategies where investors convert the retail assets demonstrating poor performance to residential or warehouse properties.
Note: Seoul Retail refers to Seoul's prime retail market.