Despite Weakness in Nationwide Commercial Districts in Q2, Vacancy Rates Decrease and Rents Rise in Seoul

Amid nationwide declines in commercial rent prices due to high interest rates and economic slowdown, Seoul saw rents increase thanks to a rise in foreign tourists and foot traffic. Vacancy rates in the Myeongdong commercial district decreased, and areas like Sinsa Station and Hongdae also showed signs of revitalization.

On the 4th of last month, citizens were coming and going on the streets of Myeongdong, Seoul. / Photo by Yonhap News

According to the 2nd quarter commercial real estate rental trend survey released by the Korea Real Estate Board on the 26th, the nationwide commercial rent price index fell by 0.03% for medium-to-large stores, 0.14% for small stores, and 0.11% for shopping complexes compared to the previous quarter.

The Real Estate Board explained, "Due to the ongoing economic slowdown and domestic and international economic uncertainties, improved consumer sentiment did not translate into increased sales, leading to a decline in commercial rents." Rent prices by type were 26,700 KRW per square meter for shopping complexes, 25,600 KRW for medium-to-large stores, and 19,400 KRW for small stores.

However, Seoul saw an increase in the rent price index across all types of commercial properties due to the rise in foreign tourists and expectations of commercial district revitalization. Medium-to-large stores experienced a 0.27% increase compared to the previous quarter, driven by rent hikes in the Chungmuro district, where young foot traffic increased, and the Ttukseom district, which is being revitalized by pop-up stores and startup tenants. Small stores rose by 0.26%, and shopping complexes by 0.13%.

Vacancy rates also slightly increased nationwide for both medium-to-large and small stores, but decreased in Seoul. The national vacancy rate for medium-to-large stores was 13.5%, up 0.2 percentage points from the previous quarter, and 6.9% for small stores, up 0.1 percentage points. Shopping complexes remained steady at 9.3%. This is attributed to the contraction of small business owners' perceived economic conditions due to high interest rates and rising operating costs.

In contrast, Seoul's medium-to-large commercial district vacancy rate fell by 0.1 percentage points to 8.4%, and small stores dropped by 0.4 percentage points to 5.8%. Specifically, the Myeongdong district's vacancy rate has continuously decreased since the 4th quarter of last year (43.5%) due to increased tourists and foot traffic, reaching 35.8%, and long-term vacancies in the Dangsan Station district were resolved through new store openings.

During the same period, Seoul's office rent price index also rose by 0.39%, influenced by increased demand such as the expansion of hub offices amid limited supply. The vacancy rate also decreased by 0.1 percentage points to 9.4%.

Meanwhile, investment returns reflecting performance from real estate holdings over three months were 1.00% for offices, 0.73% for medium-to-large stores, 0.66% for small stores, and 1.01% for shopping complexes. Capital return rates, an indicator of asset value changes, were 0.02% for offices, -0.12% for medium-to-large stores, -0.12% for small stores, and -0.03% for shopping complexes.

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