Seoul's 150 Key Commercial Districts Rent at 3.29 Million KRW per Month, Down 0.6% Year-on-Year

Sales Plunge 36.4% - Rent Slightly Down 0.6%, Reasonable Rent Adjustment Needed

[Asia Economy Reporter Lim Cheol-young] The average monthly standard rent per unit area (㎡) for 7,500 first-floor stores located in 150 major commercial districts in Seoul, including Gangnam, Myeongdong, and Hongdae Entrance, was 54,100 KRW last year. When converted based on the average store area (60.8㎡), it amounted to approximately 3.29 million KRW per month.

Compared to 2019, sales dropped by about 36% due to COVID-19, but the standard rent decreased by only 0.6%, indicating that a reasonable adjustment of rent levels is necessary.

Seoul City announced the results of the ‘2020 Seoul-type Standard Rent Survey’ for 7,500 first-floor stores in 150 major commercial districts on the 7th. ‘Standard rent’ refers to the amount tenants must pay monthly for business activities, including monthly rent, common maintenance fees, and the deposit converted into monthly rent.

The operational status survey of 7,500 major commercial district stores in Seoul showed an average business period of 8 years and 6 months, daily operating hours of 11 hours, 3.4 days off per month, 2.7 employees, and an average exclusive store area of 60.8㎡.

The ‘standard rent’ was 54,100 KRW per ㎡ per month, a decrease of about 0.6% from 54,400 KRW in 2019. Based on the average exclusive area of 60.8㎡, this converts to an average monthly rent of 3.29 million KRW. The average deposit per store surveyed was 44.81 million KRW.

There was a large variation in standard rent by region. Myeongdong Street had the highest rent at 220,000 KRW per ㎡ per month among the surveyed commercial districts, while Insadong, Gangnam Station, and Apgujeong Rodeo districts also exceeded 90,000 KRW per month. By district, Gangnam-gu and Nowon-gu had the highest rents, followed by Jung-gu, Jongno-gu, Dongjak-gu, and Mapo-gu.

The ‘initial investment cost’ borne by stores at the time of first entry averaged 158.06 million KRW, of which the deposit refundable to tenants after the lease contract ends was 44.81 million KRW. The key money, which may be sunk depending on business conditions, was 61.27 million KRW, and facility investment costs were 51.98 million KRW.

The converted deposit averaged 356.44 million KRW, and 6% of the surveyed stores had converted deposits exceeding 900 million KRW, which are only partially covered by the Commercial Building Lease Protection Act.

The average monthly sales of the stores were also surveyed. Last year, the average monthly sales per unit area (㎡) were 268,000 KRW, which converts to 16.29 million KRW per month based on the average exclusive area (60.8㎡). The proportion of standard rent (3.29 million KRW) to average monthly sales was 20%, while in high-rent areas such as Myeongdong Street and Insadong, the proportion exceeded 50%.

Sales dropped by an average of 36.4% compared to 2019, with commercial districts such as Myeongdong Street, Insadong, Dongdaemun Station, Yeonnam-dong, Hongdae Entrance Station, and Gangnam Station experiencing sales decreases of over 50%. In contrast, sales declines in commercial districts near Godeok Station, Deungchon Station, and Gaebong-dong Hyundai were less than 5%.

Seoul City plans to use the survey results as a reference for calculating the ‘Seoul-type Fair Rent,’ which serves as a standard for commercial lease disputes and rent reduction adjustments, and also as research data to promote coexistence in the commercial lease sector.

Seoul City announced that it will temporarily introduce a ‘COVID-19 Coexistence Rent’ this year for stores experiencing sharp sales declines. The ‘COVID-19 Coexistence Rent’ proposes an additional temporary rent reduction reflecting the sales decline caused by COVID-19 on top of the Seoul-type Fair Rent during a specific period.

The ‘COVID-19 Coexistence Rent’ can be applied for when sales for two consecutive recent months have decreased by 30% or more compared to the average sales in 2019. For example, if the Seoul-type Fair Rent is 800,000 KRW, under the COVID-19 Coexistence Rent, the tenant would pay a reduced rent reflecting the sales decline (e.g., 600,000 KRW per month for six months) during the specified period and then revert to 800,000 KRW afterward.

Seoul City emphasized that the temporarily introduced ‘COVID-19 Coexistence Rent’ will be a good alternative not only for tenants struggling with a short-term sharp sales drop but also for landlords who find it difficult to raise the rent again after a reduction.

Meanwhile, Seoul City has been running a program since the 15th of last month that selects ‘Seoul-type Good Landlords’ who voluntarily reduce rent for tenants suffering from sales declines due to COVID-19 and provides them with up to 1 million KRW in Seoul Love Gift Certificates, which can be used like cash.

Seo Seong-man, Director of Labor and Livelihood Policy at Seoul City, said, “Many small business owners are struggling due to the prolonged sales slump caused by COVID-19. It is very encouraging that 31.6% of tenants have benefited from rent discounts thanks to good landlords who have voluntarily lowered rents. We thank the good landlords who have participated.”

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