Retail Rents Drop and Vacancies Rise... Only "Hot Spots" Like Myeong-dong and Ttukseom Remain Strong [Real Estate AtoZ]

Office Market Rises for Eighth Consecutive Quarter
Strong Performance in Gangnam and Yeouido

In the first quarter of this year, the average rent for retail spaces across the country declined, and the number of vacant stores increased, reflecting the impact of weakened domestic consumption in the commercial real estate market. This stands in contrast to the office market, where both yields and rental rates rose, supported by strong demand in major business districts.

According to the results of the Commercial Real Estate Leasing Market Trend Survey for the first quarter of this year, released by the Korea Real Estate Board on April 30, the nationwide composite rent index for retail spaces fell by 0.05% compared to the previous quarter.

By property type, small-scale retail spaces saw the largest drop at 0.16%, followed by shopping complexes at -0.07% and medium-to-large retail spaces at -0.01%. The retail rent index has been on a downward trend since peaking at 100.0 in the second quarter of 2024.

In contrast, the office rent index rose by 0.34%, led by sustained leasing demand in Seoul and Gyeonggi Province.

Vacancy Rate for Medium-to-Large Retail Spaces at 14.1%... Sejong Highest Nationwide at 27%

Office space rental notice posted on a building in downtown Seoul. Yonhap News Agency

Vacancies also increased. The national vacancy rate for general retail spaces was 13.1%, up by 0.3 percentage points from the previous quarter. The vacancy rate for medium-to-large retail spaces was 14.1%, while that for small-scale retail spaces was 8.3%.

For the first time this quarter, the vacancy rate for the first floor of general retail spaces was announced, coming in at 6.5%, a 0.5 percentage point increase from the previous quarter. The first floor, as a space directly connected to foot traffic, is considered a key indicator that most accurately reflects the perceived decline in commercial areas.

By region, the vacancy rate for medium-to-large retail spaces in Sejong was 27.0%, the highest in the country, followed by North Gyeongsang Province at 18.6% and South Jeolla Province at 14.5%, both exceeding the national average.

In contrast, the vacancy rate for medium-to-large retail spaces in Seoul remained the lowest nationwide at 9.3%. Even within Seoul, areas attracting foreign tourists such as Myeong-dong and Bukchon, as well as locations with high demand from large corporations like Ttukseom, saw rental rates increase.

Meanwhile, traditional commercial areas and regional cities have been affected by declining sales and prolonged vacancies. By major commercial district, Ttukseom saw an increase of 2.54%, while Myeong-dong rose by 2.35%.

Investment Returns Remain in the 0.7–1.2% Range... Shrinking Consumption Is the Main Cause

Commercial Real Estate Rental Market Trends. Korea Real Estate Board

Investment returns for retail spaces also remained sluggish. Medium-to-large retail spaces posted a return of 0.99%, while small-scale retail spaces came in at 0.79%. Shopping complexes increased slightly to 1.23%, but still fell short compared to the office return of 1.80%. Returns for general retail spaces declined due to the downturn in regional real estate markets. Only shopping complexes, with a slight rise in asset value centered on the Seoul metropolitan area, recorded 1.23%, up 0.09 percentage points from the previous quarter.

The Korea Real Estate Board identified a decline in private consumption as the main reason for the stagnation in the retail leasing market. In fact, the retail sales index fell from 126.4 in December 2025 to 115.5 in February 2026, becoming a primary cause of the commercial downturn. However, certain commercial areas with demand from foreign tourists and large corporate stores saw rental rates increase. The Korea Real Estate Board explained, "While major commercial districts in Seoul and Busan that attract tourists continue to show an upward trend, traditional commercial areas and regional cities are experiencing declines due to falling sales and prolonged vacancies."

In the office leasing market, asset value increases in areas such as Gangnam (2.65%), downtown Seoul (2.45%), and Yeouido·Mapo (2.20%) drove overall returns. The office rent index rose by 0.34% from the previous quarter, and the investment return was 1.80%, up 0.06 percentage points from the previous quarter. The investment return on Seoul offices reached 2.35%. However, office markets in provinces outside of Seoul and Gyeonggi continued to decline. The vacancy rate for offices in North Chungcheong Province was 29.9%, the highest nationwide, while capital gains in South Gyeongsang Province (-0.40%) and Jeju (-0.38%) were negative.

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