Last Year Seoul Major Commercial Districts Rent 'Monthly Average 3.48 Million KRW'... Myeongdong Street Highest at '210,000 KRW per ㎡'

Direct On-Site Survey of 7,500 First-Floor Stores in 150 Key Commercial Areas
Average Rent Fell 0.7% Year-on-Year Due to Prolonged COVID-19 Impact
Survey Results Used to Update 'Seoul-Type Fair Rent' for Active Use in Landlord-Tenant Dispute Resolution

Status of Average Rental Fee per Unit Area

[Asia Economy Reporter Lim Cheol-young] The average monthly standard rent for first-floor stores located in major commercial districts in Seoul is 53,900 KRW per square meter (㎡), and the average store area is 64.5㎡ (19.51 pyeong), indicating that tenants pay an average monthly rent of 3.48 million KRW per store.

On the 5th, the Seoul Metropolitan Government announced the results of the '2021 Commercial Lease Survey,' which targeted 7,500 first-floor stores in 150 densely populated commercial districts for daily life businesses in the city, including areas such as Gyodae, Jongno 3-ga, and Yeonnam-dong. This survey was conducted through face-to-face interviews with tenants of first-floor stores over a total of eight months from May to December of last year. The surveyed commercial districts were selected considering factors such as the 'Small Business Plaza (Small Enterprise and Market Service),' 'Seoul Our Neighborhood Store Commercial District Analysis Service,' and floating population by district.

The survey results showed that the average standard rent last year was 53,900 KRW per 1㎡, which is 0.7% lower compared to 54,300 KRW per month in 2020.

When converted to the average exclusive area per store (64.5㎡, 19.51 pyeong), the monthly average rent amounts to 3.48 million KRW. The average deposit was 820,000 KRW per square meter, totaling 52.89 million KRW per store.

The area with the highest standard rent remained Myeongdong Street in 2020, with about 210,000 KRW per 1㎡ per month. Other commercial districts exceeding 80,000 KRW per month included Insadong (90,500 KRW), Gangnam Station (89,900 KRW), Cheonho Station (88,800 KRW), Yeouido Station (88,700 KRW), and Junggye-dong Academy District (81,300 KRW). When converted to the average exclusive area per store (64.5㎡), the standard rent was 13.72 million KRW per month in Myeongdong Street, 5.84 million KRW in Insadong, and 5.8 million KRW in Gangnam Station.

The average converted deposit per store (deposit + monthly rent × 100) was 349.16 million KRW, and 4.5% of stores exceeded the converted deposit of 900 million KRW, which limits the application of the Commercial Building Lease Protection Act. The initial investment cost borne at the time of first entry was on average 154.99 million KRW. Among the initial investment costs, the deposit refundable to tenants after the lease contract ends was 51.72 million KRW. The key money, which may be sunk depending on the business environment, was 55.71 million KRW, and facility investment costs were 47.56 million KRW.

The operational status per store was also investigated. The average exclusive area of the surveyed stores was 64.5㎡ (19.51 pyeong), the average total business period was 10 years and 4 months, the average daily operating hours were 11.5 hours, the average monthly days off were 3.6 days, and the average number of employees was 2.4. Regarding store types, 87.7% were independently operated by individuals, and 12.2% were franchise affiliates or directly managed stores. Among the surveyed stores, 55% had an exclusive area of less than 49.5㎡ (approximately 15 pyeong), and restaurants such as Korean and Chinese cuisine accounted for 59.7% of the businesses.

Seoul City plans to update the Seoul-type fair rent, necessary for resolving commercial building lease disputes, by reflecting the latest information such as actual transaction rents collected in this lease survey, and to use it for rent increase/decrease adjustments to help increase the dispute resolution rate.

Meanwhile, since 2016, Seoul City has been holding the 'Commercial Building Lease Dispute Mediation Committee' to mediate disputes between landlords and tenants when conflicts arise. The Dispute Mediation Committee consists of 30 related experts, including lawyers, appraisers, architects, certified public accountants, and professors, and plays a role in reviewing legal issues and conducting on-site investigations related to lease disputes such as rent adjustments, contract termination, key money recovery, contract renewal, and restoration to original condition.

Han Young-hee, Seoul City's Director of Labor, Fairness, and Coexistence Policy, said, "Seoul City plans to actively support landlords and tenants to coexist by operating a reasonable level of fair rent reflecting sales fluctuations in preparation for an increase in commercial lease disputes following the easing of social distancing, as well as a 'Visiting Commercial Lease Dispute Mediation Committee.'"