Myeongdong Commercial Area Recovers Lowest Vacancy Rate... "Retail Market Uncertainty Grows This Year"

With the COVID-19 endemic phase leading to a resurgence of foreign tourists, the Myeongdong commercial district has revived. It reclaimed the lowest vacancy rate among Seoul's street-level commercial districts in the fourth quarter of last year.

Foreign tourists visiting Myeongdong, Jung-gu, Seoul, are taking photos. / Photo by Jinhyung Kang aymsdream@

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According to the '2023 Q4 Retail Market Report' published on the 9th by global real estate consulting firm Cushman & Wakefield, the average vacancy rate for Seoul's street-level commercial districts was 18.7%, down 0.8 percentage points from the previous quarter. Compared to the same period last year, it decreased by 4.4 percentage points.

Among these, Myeongdong's vacancy rate dropped by 33.0 percentage points from a year ago to 9.4%, marking the largest decline among the six major commercial districts (Myeongdong, Gangnam, Hongdae, Garosugil, Hannam·Itaewon, Cheongdam). At the same time, it became the district with the lowest vacancy rate.

This is attributed to the increase in foreign tourists due to the endemic phase. As of December last year, the number of foreign arrivals was 1.03 million, approximately 1.9 times higher than the same month the previous year. In Myeongdong, which attracts many tourists, numerous stores related to K-beauty and fashion targeting foreigners have opened.

The district with the next lowest vacancy rate after Myeongdong is Hannam·Itaewon. In addition to established contemporary brands, recently, emerging domestic designers and beauty brands have newly entered the market.

In Hongdae, the vacancy rate decreased by 3.5 percentage points compared to the same period last year, as medical businesses increased mainly in newly constructed buildings along main roads. In Cheongdam, luxury jewelry and high-end brands have either entered or are preparing to open flagship stores.

On the other hand, the vacancy rates in Gangnam and Garosugil districts increased. This is believed to be due to relatively high rents, the expansion of the nearby Sero-su-gil commercial district, and the rise of alternative districts such as Seongsu.

This year, it has become difficult to guarantee a decline in vacancy rates across the six major commercial districts. As the base effect disappears, the rate of vacancy decline is gradually slowing, and the retail market uncertainty has increased due to economic recession, high interest rates, high inflation, and resulting consumption contraction.

Cushman & Wakefield stated, "While demand for top luxury brands remains solid, consumption patterns are changing with polarization intensifying as value-for-money consumption gains attention amid the recession." They added, "The key will be how the retail market secures growth potential in this changing environment."

They further noted, "Positive factors such as expected interest rate cuts in the second half of this year, economic recovery, and additional inflows of foreign tourists including Chinese visitors will be necessary to improve demand."

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