[Insight & Opinion] Vacant Commercial Spaces in Gangnam and New Towns Signal Urban Transformation

Published 13 Dec.2023 11:12(KST)

Walking through downtown Seoul, one increasingly feels the number of vacant commercial spaces growing. Even long-coveted storefronts along main roads are turning into empty units without resistance. Commercial spaces are not only places to sell goods but also precious entities that maintain the vitality of a city. On the other hand, they serve as a means for real estate owners to assess the value of their assets by providing a steady cash flow. Commercial properties, which generate long-term cash flow from a single investment, have been regarded by many as a way to build wealth and ensure a stable retirement. However, structural issues such as the shift toward online lifestyles, population decline, and aging are overlapping, turning commercial spaces into urban headaches.

Even in Gangnam, Seoul, considered the center of economic power and consumption, commercial spaces are increasingly vacant. The situation in new towns is even more severe. Excessive commercial spaces have been supplied without considering population size, resulting in many buildings being mostly empty. Despite this, commercial spaces continue to be supplied, worsening the problem. Because many areas require construction and completion within a certain period after land acquisition to expedite urban development, commercial spaces keep being supplied even when vacancies are obvious. Although there are various reasons, the common phenomenon is that commercial spaces have become a burden.

Observing the vacant commercial spaces while strolling through Gangnam streets, they can be broadly divided into two categories. The first is commercial spaces pursuing ambiguous mid-to-high-end sophistication. These places offer products of better quality and uniqueness than average but are difficult for consumers to pay for readily. Considering that affordable, everyday convenience stores and ultra-luxury brands are maintaining their presence, it is clear that polarization in consumption is leading to the decline of commercial spaces.

The second category is commercial spaces in newly constructed buildings. When buildings are newly constructed after enduring soaring land prices, landlords inevitably expect high rents to achieve appropriate returns. However, in reality, businesses able to pay such rents and generate profits are very limited, leaving first-floor commercial spaces in decent new buildings empty. Since the expected cash flow does not materialize, repaying loan interest becomes increasingly difficult. The decline of commercial spaces should be accepted not as a temporary phenomenon due to economic fluctuations but as an inevitable change resulting from social structural shifts.

To solve problems caused by commercial spaces, the supply of commercial properties in ongoing reconstruction, redevelopment, and new town developments must be drastically reduced compared to before. The proportion of commercial land in new towns, which was supplied on the premise of commercial construction, should be significantly lowered. The creation of street-type commercial spaces, which is being forced in some reconstruction complexes to maintain urban vitality, should also be stopped. For commercial spaces in new towns that have remained vacant for a long time, conversion to office or residential use should be explored. Institutional improvements and new regulations should be implemented concurrently during this process.

Above all, a change in perspective toward commercial spaces is crucial. The vague expectation that owning commercial property will generate income without special effort must now be discarded. Society is rapidly changing, but physical spaces cannot keep pace, so various problems always arise. It is time to design urban spaces with future changes in mind rather than current demand. Although parting from familiarity is difficult, we must not forget that it marks the beginning of new opportunities.