Declining Itaewon Commercial Area... "3 Out of 10 Places Are Vacant"

US Military Base Relocation + Gentrification + COVID-19 Overlap
Small Retail Vacancy Rate Exceeds 30% in Q3
"Every Other Store Has Lease or Sale Sticker"

A commercial building in Itaewon, Yongsan-gu, Seoul, with a banner regarding inquiries about sales after closure (Photo by Sangga Information Research Institute)

[Asia Economy Reporter Onyu Lim] The shops along Gyeongridan-gil in Itaewon-dong, Yongsan-gu, Seoul, the original '~ridan-gil' streets across the country, are rapidly declining. From cafes to accessory shops, many places have stickers related to rental and sale inquiries posted. The decline of Gyeongridan-gil, triggered by the relocation of the US military base and gentrification (a phenomenon where rising rents due to commercial revitalization push tenants to the outskirts), has spread uncontrollably since the outbreak of COVID-19.

According to the Korea Real Estate Board on the 6th, the vacancy rate of small-scale shops in the Itaewon commercial district of Yongsan-gu, Seoul, in the third quarter (July to September) recorded 30.3%. This means that 3 out of 10 places have closed or relocated. The vacancy rate, which was 6.4% in the first quarter, surged to 15.2% in the second quarter and exceeded 30% in the third quarter.

Among major commercial districts in Seoul, Itaewon is the only place where the vacancy rate of small-scale shops exceeds 30%. Itaewon has a high proportion of shops with two floors or less compared to downtown Seoul. The Korea Real Estate Board classifies shops with two floors or less and a total floor area of 330㎡ or less as small-scale shops, and those with three floors or more and a total floor area exceeding 330㎡ as medium to large-scale shops.

The Itaewon commercial district began to decline in 2018 when the US Forces Korea Command and the United Nations Command, which were stationed in Yongsan, relocated. Although it emerged as a hot place through social networking services (SNS), excessive monthly rent increases by building owners accelerated gentrification, causing the area to lose vitality. Moreover, after the COVID-19 outbreak linked to Itaewon clubs in May, visitor numbers sharply dropped.

Cho Hyun-taek, an official from the Commercial Information Research Institute, analyzed, "While sales significantly decreased due to the relocation of the US military base, monthly rents remained the same, causing unique stores to leave due to rent burdens, which increased the vacancy rate. The outbreak of COVID-19 further caused the vacancy rate to surge."

Not only Itaewon but also major commercial districts in Seoul are experiencing rising vacancy rates. Due to the prolonged economic downturn caused by COVID-19 and the activation of online transactions, offline stores are shrinking. The vacancy rates of small-scale shops in Seoul were ▲4% in the first quarter ▲4.2% in the second quarter ▲5.7% in the third quarter, while those of medium to large-scale shops were ▲7.9% in the first quarter ▲7.9% in the second quarter ▲8.5% in the third quarter.

Even the Gangnam commercial district, which maintained an active shop market, is rapidly declining. The vacancy rate of medium to large-scale shops in Gangnam-gu in the third quarter recorded 11.3%, an increase of 1.5 percentage points from 9.8% in the second quarter. This is the first time the vacancy rate in Gangnam-gu has exceeded 10% since statistics began to be compiled.

Researcher Cho said, "As the risk of COVID-19 continues, the inflow of people to commercial districts like Gangnam, which used to attract many visitors, has decreased. The depressed atmosphere is expected to continue for the time being unless there are special variables such as the end of the COVID-19 virus or improvement in the domestic economy."

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