COVID-19 Hits 'Sangga' Directly... Vacancy Rates Rise and Rents Fall

Vacancy Rates by Type Nationwide (Source=Korea Real Estate Board)

[Asia Economy Reporter Moon Jiwon] As the spread of the novel coronavirus infection (COVID-19) worsened the economic recession, the vacancy rate of commercial spaces increased and rents fell. In particular, in regions severely affected by COVID-19 such as Daegu and Gyeongbuk, the commercial district downturn was found to be more severe.

According to the results of the first quarter commercial real estate lease trend survey announced by the Korea Real Estate Agency on the 27th, the nationwide office commercial vacancy rate was 11.1%, an increase of 0.1 percentage points compared to the previous quarter. For commercial spaces, the vacancy rate for medium to large-sized spaces averaged 11.7%, and small-sized spaces 5.6%, rising by 0.7 percentage points and 0.1 percentage points respectively from the previous quarter.

Offices are mainly used as business-related facilities such as companies, so the damage from COVID-19 was minimal, but commercial spaces saw increased vacancies due to regional economic recession, weakened consumer sentiment, and decreased sales.

Medium to large-sized commercial spaces, defined as those on the third floor or higher or with a total floor area exceeding 330㎡, had vacancy rates higher than the national average in regions such as Gyeongbuk (17.4%), Jeonbuk (15.7%), and Chungbuk (15.5%). In contrast, Jeju (6.3%), Seoul (7.9%), and Gyeonggi (9.8%) had relatively lower rates.

In Gyeongbuk, the vacancy rate rose by 1.4 percentage points from the previous quarter as the downturn worsened in areas directly hit by COVID-19 such as Gumi (24.9%) and Pohang (21.5%). Daegu (15.2%) also saw an increase of 0.7 percentage points compared to the previous quarter.

The vacancy rate for small-sized commercial spaces was higher than the national average (5.6%) in Sejong (10.6%), Jeonbuk (10.1%), and Chungnam (7.3%), while Jeju (2.1%), Gyeonggi (3.9%), and Seoul (4.3%) were below the average.

Rents in the first quarter fell across all types compared to the previous quarter. Office rents dropped by 0.84%, while commercial spaces saw declines of 1.47% for medium to large-sized, 1.55% for small-sized, and 1.28% for collective commercial spaces.

Rents for collective commercial spaces were the highest at 27,800 KRW per ㎡, followed by medium to large-sized commercial spaces at 26,700 KRW, and small-sized commercial spaces at 20,000 KRW. These figures represent decreases of 1.28%, 1.47%, and 1.55% respectively compared to the fourth quarter of last year.

This content was produced with the assistance of AI translation services.