The Seoul Metropolitan Government has initiated regulatory relaxation to control the supply of commercial properties suffering from oversupply and to boost the supply of small-scale buildings. This will allow for the construction of residential facilities such as officetels in mixed-use buildings within Seoul's commercial districts, and a bill has been introduced to relax the floor area ratio in general residential areas 2 and 3 for three years.
According to the Seoul City Council on the 11th, Kim Gil-young, the chairman of the Urban Planning and Balance Committee of the Seoul City Council, proposed the 'Ordinance to Partially Amend the Urban Planning Ordinance of Seoul Special City' containing this content on the 31st of last month.
This amendment aligns with the plan announced by the Seoul Metropolitan Government in January this year to abolish and relax the ratio of non-residential facilities in commercial and quasi-residential areas. On January 16, the Seoul Metropolitan Government amended the 'Seoul City District Unit Planning Standards' to eliminate regulations on the floor area ratio for non-residential facilities (more than 10%) in quasi-residential areas.
The amendment includes a provision to reduce the mandatory ratio of non-residential facilities when constructing mixed-use buildings in Seoul's commercial areas from 20% to 10% of the total floor area. Until now, at least 20% of the total floor area had to be occupied by non-residential facilities such as retail and office spaces. If the non-residential ratio is halved, more residential facilities like officetels can be constructed within commercial areas. This ordinance will come into effect immediately upon publication.
The amendment also includes a temporary relaxation of the floor area ratio in general residential areas 2 and 3 for three years. This is intended to revitalize the development of small residential buildings, which has been declining due to the recent construction industry recession, by relaxing the floor area ratio. Once the amendment passes, buildings in general residential areas 2 and 3 will be subject to the relaxed standards up to the maximum floor area ratio limits defined in the 'Enforcement Decree of the National Land Planning and Utilization Act.' This regulation will apply until May 18, 2028, for applications including construction permits and project implementation plans for small housing maintenance projects.
According to officials from the Seoul Metropolitan Government and the Seoul City Council, the amendment completed its legislative notice on the 5th. If it passes the standing committee and the plenary session of the Seoul City Council, it will be published 20 days after being sent to the Seoul Metropolitan Government. The amendment is expected to be implemented as early as June.
The national retail market is suffering from high vacancy rates. This is due to economic stagnation and a relative increase in online consumption compared to offline.
According to the Korea Real Estate Board, the vacancy rate for nationwide small retail shops (2 stories or fewer, 330 square meters or less) rose from 6.53% in the third quarter to 6.74% in the fourth quarter last year. This is more than 1 percentage point higher than the first quarter of 2020 (5.6%), when the COVID-19 pandemic began. The vacancy rate for mid-sized and larger retail shops also increased from 12.73% in the third quarter to 13.03% in the fourth quarter.
The construction industry believes that if this partial amendment to the urban planning ordinance passes, it will improve business viability and inject vitality into a stagnant construction market.
Bae Jun-hyung, CEO of Value Up Innovation, said, "In the past, major commercial areas, known as golden lands for their high revenue, are seeing vacancies increase due to oversupply, sluggish domestic consumption, the bankruptcies of self-employed individuals, and political and economic uncertainties," and he analyzed that "the Seoul city's regulatory relaxation in urban planning symbolizes a shift toward long-term urban restructuring and spatial strategy beyond a short-term response to the construction industry recession."
He added, "This is a reconfiguration of the boundary between residential and commercial facilities to reflect market demands stemming from changes in consumer structure and to revitalize the construction industry."