Seongsu-dong Sustainable Development Zone Rent Increase Rate Falls by 0.16%P

Seongsu-dong Sustainable Development Zone 2019 Commercial Lease Survey Results Show Average Rent Increase Rate Down 0.16% Points... Seongdong-gu Promotes Win-Win Agreement Since 2015, 69.8% of Building Owners in Seongsu 1-ga 2-dong Join Voluntary Agreement

2017 Seongsu-dong Sustainable Development Zone Win-Win Agreement Ceremony

[Asia Economy Reporter Jong-il Park] Seongdong-gu (Mayor Jeong Won-oh) announced that the rent increase rate for commercial spaces in the Sustainable Development Zone decreased by an average of 0.16 percentage points compared to 2018, according to a survey conducted over approximately 10 weeks from October to December last year on 662 commercial tenants in the area.

The "Sustainable Development Zone" refers to the area designated and announced by the district office to prevent gentrification and protect the local community ecosystem and commercial district, covering Seoul Forest-gil, Bangsongdae-gil, and Sangwon-gil in Seongsu 1-ga 2-dong.

A win-win agreement among building owners, tenants, and Seongdong-gu is being promoted, with 69.8% of building owners in Seongsu 1-ga 2-dong voluntarily participating in the agreement to restrain rent increases and stabilize the local commercial district.

According to the survey results, the average rent increase rate (excluding deposits) for the entire Sustainable Development Zone was 2.37%, down 0.16 percentage points from 2.53% in 2018. The average rent per pyeong (3.3㎡) was 98,000 KRW, a 1.45% increase from 96,600 KRW in 2018.

Notably, in all indicators?including rent increase rate, rent per pyeong, and converted deposit?the companies that signed the win-win agreement showed lower figures compared to those that did not.

The average rent increase rate (excluding deposits) for companies that signed the win-win agreement was 1.68%, which is 1.38 percentage points lower than the 3.06% average for non-signatories. The rent per pyeong was 95,900 KRW for signatories, compared to 100,000 KRW for non-signatories.

The converted deposit, an important indicator that determines the scope of application of the Commercial Lease Protection Act by adding 100 times the rent to the deposit, was also on average about 43 million KRW lower for companies that signed the win-win agreement compared to those that did not.

Examining rent increase rates by area, Seoul Forest-gil recorded 4.00%, Bangsongdae-gil 2.31%, and Sangwon-gil 1.45%. Considering that Seongsu-dong is one of the most prominent commercial districts in Seoul with soaring rents, these results are remarkable.

In particular, Seoul Forest-gil has seen active openings of new businesses such as cafes and restaurants by converting detached houses. While the rent increase rate was as high as 7.92% in 2018, it stabilized at around 4% in 2019, below the 5% cap set by the Commercial Building Lease Protection Act, thanks to focused efforts on promoting the win-win agreement.

Additionally, the average business operation period for companies that did not sign the win-win agreement was 56 months (4 years and 7 months), whereas for signatories it was 75 months (6 years and 3 months), indicating that the win-win agreement has contributed to stabilizing the local commercial district.

Jeong Won-oh, Mayor of Seongdong-gu, stated, "As a result of proactively implementing various policies such as ordinance enactment, win-win agreements, and the creation of safe commercial districts in Seongdong to prevent the harms of gentrification, awareness among building owners and tenants has changed, spreading consensus for regional coexistence. However, since the win-win agreement is not legally binding, laws that provide enforceability, incentives, rent stabilization, and infrastructure support need to be promptly established."