38% of Medium to Large Commercial Buildings in Myeongdong, Seoul Closed... Direct Hit from COVID-19

The streets of Myeongdong, Seoul, are deserted due to the impact of the novel coronavirus disease (COVID-19). Photo by Moon Honam munonam@

[Asia Economy Reporter Moon Jiwon] As outdoor activities have been restricted due to the COVID-19 pandemic, it has been revealed that one out of three commercial spaces in Seoul's representative shopping districts?Myeongdong, Itaewon, and Hongdae-Hapjeong?has closed down.

According to the Korea Real Estate Board on the 28th, the vacancy rate of medium-to-large commercial spaces nationwide in the first quarter of this year was 13.0%, an increase of 0.6 percentage points compared to the fourth quarter of last year. The vacancy rate for small-scale commercial spaces slightly decreased from 6.5% to 6.4%, while office vacancy rates rose from 10.8% to 11.1%.

The Real Estate Board explained that the vacancy rate of medium-to-large commercial spaces increased due to rising closures caused by declining sales amid the prolonged COVID-19 pandemic, whereas small-scale commercial spaces saw a slight decrease in vacancy rates due to new tenant demand emerging in some shopping districts centered around the metropolitan area and major cities.

The vacancy rate for medium-to-large commercial spaces in Myeongdong, which was hit hard by the decrease in foreign tourists, reached 38.4%. The vacancy rate for small-scale commercial spaces in Itaewon was 31.9%, and in the Hongdae-Hapjeong area, it was 22.6%, affected by restrictions such as bans on gatherings and business suspensions on entertainment facilities.

In Gyeonggi Province, the vacancy rate for small-scale commercial spaces in Anseong Market was high at 17.2%, and the commercial district in Kimryangjang-dong, Cheoin-gu, Yongin, recorded a vacancy rate of 13.7%, due to strengthened social distancing measures in the metropolitan area.

As vacant commercial spaces increased, rental prices also declined. In the first quarter, the rent for medium-to-large commercial spaces nationwide fell by 0.26% compared to the fourth quarter of last year, recording 25,600 KRW per square meter. The rent for small-scale commercial spaces was 19,100 KRW per square meter, and for collective commercial spaces, it was 27,100 KRW per square meter, decreasing by 0.22% and 0.20%, respectively.

In Seoul, the rent for medium-to-large commercial spaces (52,300 KRW per square meter) dropped by 0.41% compared to the previous quarter, while small-scale commercial spaces (49,800 KRW) and collective commercial spaces (47,100 KRW) fell by 0.31% and 0.25%, respectively.

The vacancy rate for office buildings nationwide increased from 10.8% to 11.1%. The vacancy rate for office buildings in Seoul averaged 8.3%, decreasing by 0.4 percentage points from the previous quarter.