The retail rental market in Seoul has shown resilience, buoyed by an increase in foreign tourists and foot traffic, while regional markets continue to face challenges due to declining consumer spending and prolonged vacancies, highlighting a stark polarization in the commercial real estate sector.
The Korea Real Estate Agency reported on July 30 that the national integrated retail rental price index fell by 0.03% compared to the previous quarter. In contrast, Seoul saw an increase of 0.46%, diverging from the national downward trend.
The rental market in Seoul has been particularly strong in key areas attracting foreign tourists. The rental price index for Myeongdong rose by 3.19%, marking the highest increase among major districts in Seoul. Ttukseom and Jongno also saw increases of 2.55% and 1.28%, respectively.
All types of retail spaces in Seoul experienced rental price increases. Medium to large retail spaces rose by 0.50%, small retail spaces by 0.45%, and collective retail spaces by 0.34%. The only regions where retail rental prices increased nationwide were Seoul and Busan.
Conversely, regional markets continued to see rental price declines due to decreased sales and prolonged vacancies. The integrated retail rental price index for Chungbuk fell by 0.27%, the largest drop among regions, while Jeonnam saw a decrease of 0.25%.
In specific areas, the rental price index for Chungbuk Innovation City dropped by 1.97%, and the Chungbuk University area also saw a decline of 0.78%. The Korea Real Estate Agency attributed these trends to market decline, long-term vacancies, and downward adjustments in rental prices to address vacancies.
The burden of vacancies is also more pronounced in regional areas. The national average vacancy rate for general retail spaces is 13.4%, up 0.3 percentage points from the previous quarter. The vacancy rate for medium to large retail spaces is 14.3%, while small retail spaces stand at 8.5%. The vacancy rate for first-floor general retail spaces, which are more sensitive to market conditions, is 6.7%.
By region, Sejong has the highest vacancy rate at 22.8%. Daegu follows at 17.8%, Chungbuk at 17.4%, Gyeongbuk at 16.7%, and Gwangju at 16.5%, all exceeding the national average. In contrast, Seoul's general retail vacancy rate is 9.4%, lower than the national average.
Unlike the retail sector, the office market continues to rise. The national office rental price index increased by 0.42%, while Seoul's rose by 0.61%. The office rental price index in Seoul has now increased for 18 consecutive quarters since the first quarter of 2022.
In Seoul, the office rental price indices for Gangnam and the city center each rose by 0.65%. The Yeouido and Mapo areas also saw an increase of 0.50%. The stability in demand for prime office spaces in Gangnam and the city center, along with increased relocation demand due to redevelopment in Yeouido, were noted as contributing factors.
Investment returns have also improved, driven by rising asset values in the metropolitan area. The national office investment return rate is now 2.15%, up 0.35 percentage points from the previous quarter. In Seoul, the office investment return rate is 2.77%, with Gangnam at 3.00%, the city center at 2.91%, and Yeouido and Mapo at 2.87%.
In contrast, the investment return rates for retail spaces have increased, with medium to large spaces at 1.10%, small spaces at 0.86%, and collective retail spaces at 1.30%. However, the regional real estate market continues to face declines in asset values, while the capital region, including Seoul and Gyeonggi, has seen rising capital returns, widening the regional disparity.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.