Seoul retail rents continue to rise in Q3

Rents in Myeongdong saw the largest growth of 1.8%.

Both Shopping Malls and High Streets in Seoul observed an increase in net effective rents by 0.8% and 0.5% q-o-q, respectively. 

According to JLL, looking at High Street districts, rents in Myeongdong showed the largest increase of 1.8% q-o-q underpinned by the revitalisation in tourism, while Gangnamdaero and Hongdae exhibited an increase of 0.5% q-o-q. Garosugil and Cheongdam stayed flat on a quarterly basis.

Here’s more from JLL:

Market yields for both Shopping Malls and High Streets went up 10 bps to 6.1% and 5.9%, respectively. Notable transactions included an urban retail building (Taurus Shopping Tower), purchased by Night Bridge Partners for KRW 100 billion from IGIS Asset Management, and a hypermarket deal, Homeplus Naedang, acquired by Hyewoo for KRW 63 billion. Homeplus sold one of its branches to secure funds.

Consumer sentiment index falls below the benchmark of 100

The consumer sentiment index dipped, recording 99.7 in September. The index fell below the 100 mark for the first time in four months. Despite a rebound in consumer spending, expectations for economic recovery has weakened to some extent. Retail sales recorded 1.5% in June and -1.7% in July y-o-y. The same-department store sales marked 0.3% in June, 2.1% in July and -4.9% in August y-o-y.

The number of monthly overseas tourists in August stood at 1,089,133, up 250.3% y-o-y. With a steadily increasing number of travellers, an influx of Chinese tourists is expected amid the resumption of group travel starting in August. Japanese tourists remained a significant contributor to the monthly arrival of foreign travellers, representing the largest share throughout 2023.

Vacancy rates of both Shopping Malls and High Streets contract

No new retail assets were introduced to the JLL basket in 3Q23.

The vacancy rates of Prime Shopping Malls contracted marginally by 55 bps q-o-q. All Shopping Malls exhibited improved occupancy except Times Stream. Parnas Mall maintained its record of zero vacancy achieved in the previous quarter. For High Streets, vacancy rates for Hongdae and Myeongdong contracted by 413 bps and 282 bps q-o-q, respectively, but remained virtually flat for the others.

Outlook: Chinese group tour resumption impacts domestic retail market

The return of Chinese group tours should contribute to the rebound in tourism and add vitality to the offline retail market, specifically in tourist-centric commercial districts such as Myeongdong and Hongdae. In particular, the effect of increasing tourists is expected to be witnessed during National Day, which is one of the three major holidays in China.

Investors are expected to face continuous challenges in assessing compelling opportunities in retail assets. Only assets with significant potential for value-add are likely to draw investor interest. While a couple of noteworthy deals have been observed in the quarter, participation from financial investors has yet to be observed.

Note: Seoul Retail refers to Seoul's prime retail market.