Vacancy Rates Near 30% in Itaewon as Myeongdong Store Rents Drop 2%...

Korea Appraisal Board Q2 Commercial Real Estate Lease Survey
Rent Declines Across All Types Compared to Previous Quarter

On the 2nd, various places on the streets of Myeongdong, Seoul, displayed notices of temporary closure related to the novel coronavirus infection (COVID-19), creating a quiet atmosphere. Photo by Moon Honam munonam@

[Asia Economy Reporter Moon Jiwon] The rent for commercial properties in Myeongdong, Jung-gu, Seoul, known as South Korea's prime commercial district, has dropped by more than 2% compared to the previous quarter. Due to the spread of the novel coronavirus disease (COVID-19), the decrease in tourists and the increase in remote work have caused rents for all types of commercial real estate to decline.

According to the Korea Appraisal Board's Q2 commercial real estate rental trend survey released on the 29th, rents and investment yields fell across offices and all types of commercial properties compared to the previous quarter, while vacancy rates increased.

The national rental price index, which indicates market rent fluctuations, showed that office rents fell by 0.23% quarter-on-quarter, while commercial properties declined by 0.26% for medium to large stores, 0.25% for small stores, and 0.31% for collective stores. The national average vacancy rates were 11.3% for offices, 12.0% for medium to large commercial properties, and 6.0% for small commercial properties.

In Seoul, rents dropped across medium to large commercial properties (-0.28%), small commercial properties (-0.34%), and collective commercial properties (-0.35%). The decline was particularly significant in commercial districts highly dependent on foreign tourists, such as Myeongdong and Namdaemun.

Myeongdong, severely impacted by the decrease in Chinese tourists, saw rents fall by 2.04%, and Namdaemun by 0.56%. The commercial areas of Itaewon and Hyehwa-dong, which experienced COVID-19 outbreaks and have many performance venues, also saw significant rent declines. With the rise of online shopping and other non-face-to-face consumption, the Dongdaemun commercial district also experienced a sharp downturn.

Changes in work environments, such as the spread of remote work, also caused office rents to fall. In Seoul (-0.22%), office rents dropped significantly in areas such as City Hall (-1.77%), Myeongdong (-0.85%), and Cheonho (-0.6%).

The vacancy rate for offices in Seoul was recorded at 9.1%. The Korea Appraisal Board analyzed, "Overall, tenant demand and vacancy rates remain stable, but recent expansions in remote work have somewhat reduced new tenant demand." Vacancy rates were relatively high in Teheran-ro (9.2%) and Yeouido (9.6%).

The vacancy rate for medium to large commercial properties in Seoul was 7.9%. In Seoul, contracts have been maintained without tenant departures in commercial areas near Guro Digital Complex Station and Sillim Station, but vacancy rates increased due to closures caused by downturns in Itaewon (29.6%) and Apgujeong (16.1%).

Meanwhile, the Q2 commercial real estate rental trend survey was conducted by the Ministry of Land, Infrastructure and Transport, commissioned to the Korea Appraisal Board. Approximately 320 certified appraisers and professional surveyors conducted regional visits and interviews with landlords and tenants to compile the data.

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