"The 'vacancy bomb' is shaking the retail and knowledge industry center markets. Places once highlighted as 'revenue-generating real estate,' such as retail stores and knowledge industry centers, are being left vacant without tenants. The vacancy rate for mid-sized and large retail stores nationwide has exceeded 10%. In some collective retail spaces, the vacancy rate has reached 25%. Particularly, the vacancy rates in major new city retail areas are at a serious level. Knowledge industry centers, referred to as 'apartment-type factories,' are also causing distress for investors due to massive vacancies. The government and local governments have recognized the supply and demand imbalance of retail spaces and knowledge industry centers and are working to find solutions. The Ministry of Land, Infrastructure and Transport, the primary government agency, has launched research on easing relevant regulations, and the Anti-Corruption and Civil Rights Commission is even conducting an investigation. This series will look into the current state of retail spaces and knowledge industry centers, which have become a 'weak link' in the real estate market, as well as ways to improve vacancy rates. [Editor’s Note]
On the afternoon of 4th, in Gimpo Han River New Town's Geumbit Waterway, also known as 'Canal City,' this area represents the heart of Gimpo Han River New Town, developed by the city of Gimpo from 2009 to 2015. The area is divided into three zones along the country's longest artificial waterway, measuring 2.6 km long: 'Riverwalk' walking path, 'Han River Central Park' waterfront park, and 'Raveniche' waterfront commercial district. The total area is 49,277 square meters, equivalent to seven soccer fields, and it features water leisure facilities and various performance venues, making it a spot that foreign tourists often visit. The city of Gimpo aimed to create 'the Venice of Asia' when developing the Han River New Town. It received the 'Asia City Landscape Award' in 2021.
After walking for about 15 minutes from Janggi Station on the Gimpo Urban Railway, the Raveniche retail area, formed along the waterway, came into view. This place is densely populated with over 500 retail stores from the first phase to the ninth phase. Standing at Geumbit Waterway Bridge, which connects Raveniche retail area and the apartment complex 'E-Pyeonhan City Canal,' the tightly lined waterfront stores were visible. However, the waterway in front was exposing half of its dry concrete floor. Nearly a week had passed since April began, yet the waterway remained empty.
Mr. Lee (42), who operates a pub in Raveniche, said, "We're only now beginning to add some water," and noted, "Last year, we only launched boats in the waterway around mid-May, and I can't understand the city’s sluggish administrative behavior again this year." He added, "There is also a shortage of public parking, and while a concert facility has been built, everyone must get permission from the city to hold even one performance, which discourages people from gathering and makes business difficult."
◆ Promoted as 'the Venice of Asia,' but no water filled even in April
The Raveniche retail space refers to the underground first floor by the water as 'waterfront first floor.' The retail building usually consists of three floors, including the waterfront first floor and standard first and second floors with two blocks. In the first phase where Raveniche retail starts, there were vacant units with real estate ads indicating that they are seeking new owners. Out of 20 retail spaces on the waterfront first floor, 8 were vacant. On the standard first floor just above, 5 out of 25 were vacant, while on the top floor, 2 out of 13 were vacant. There were also five places in a row that were all vacant. Among the retail buildings extending to the ninth phase, there were no places without vacancy signs. A real estate agency located in the middle of the retail spaces had turned off its lights and was firmly closed up.
Mr. Park Min-sik (encountered at a nearby real estate agency two blocks away) said, "In winter, we have to remove the water because it freezes, which diminishes the value of the waterfront retail space," adding, "Shop owners want methods to utilize the frozen water as a skating rink for people to come, but the city in charge seems uninterested." He operates Wonderplan Company, an exhibition, convention, and event agency, and collaborates with a real estate agency in Gimpo Han River New Town.
On the waterfront first floor, there were mainly clothing stores, coffee shops, pubs, and restaurants, but most had either 1 or 2 customers sitting or were completely empty. The most noticeable people were restaurant staff stepping outside for a smoke. There were also residents jogging along the waterfront and walking their dogs. Even considering that it was a relatively quiet weekday afternoon, the number of people passing by was noticeably low.
Ms. Kwon Mo (28), met on a bench, said, "There tend to be more people on weekend evenings, but there aren’t many during other times," adding, "Most of the people are exercising or walking their dogs." One restaurant owner said, "There are many large apartment complexes nearby, and the artificial waterway is long, so I was deceived by the glamor when renting," noting, "Business is too poor that I can't renew the contract when it ends." Retail spaces here are approximately 18-21 pyeong in area and require a deposit of 20 million won and a monthly rent of 1.4 million won to 1.5 million won.
Many foreign tourists who visited this place have also expressed disappointment. Juliet Smith posted on Instagram, "Without question, it's very different from Venice," questioning, "Was the architect really wanting to reproduce Venice? (It’s not polemic, but it’s so different to Venice. Are you sure the architect wanted to reproduce it?)"
◆ Only one out of ten retail spaces on the first floor rented out
On the afternoon of 10th, the Dasan New Town in Namyangju looked deserted to an extent that belied its name. It is connected to Seoul Subway Line 8 at Dasan Station, only 15 minutes away from Gangdong District in Seoul. However, even the area near Dasan Station, the largest commercial area in this region, easily revealed vacant retail spaces still searching for owners.
D Officetel, located 280 meters from the entrance of Dasan Station, had all units vacant from 101 to 108 on the first floor. It is a newly built building completed in April last year. The purchasers are refusing to pay the remaining balance and move in, and have filed a contract termination lawsuit. S Tower, located 200 meters from Dasan Station, had only one pharmacy among the ten retail spaces on the first floor rented out. (See video) Nearby D Park and Y Tower also had visible vacancies with advertisements seeking tenants.
Real estate agent Mr. Yoon said, "Dasan-dong has become a typical bedroom community," adding, "There are Seoul residents visiting the nearby Hyundai Premium Outlet, but most use private cars, and the commercial area near Dasan Station has not been activated." This means that people who commute to Seoul and only sleep here are limited in terms of contributing to the local economy. Mr. Kim (33), who met at Dasan Linear Park, noted, "Places near Dasan Linear Park and central park still have people gathering and doing business, but those slightly outside the park are much less frequented."
◆ The Anti-Corruption and Civil Rights Commission is conducting an investigation, while the Ministry of Land, Infrastructure and Transport is researching use conversion
The vacancy rate for collective retail spaces in major new towns in the metropolitan area exceeded 10%. According to the Korea Real Estate Board, the vacancy rate for collective retail spaces in the Gyeonggi region in the fourth quarter of last year was 10.01%. Yeongjong New Town (25.8%) and Dasan New Town (13.6%) are notable areas with high vacancy rates. The enforcement ordinance of the 'Act on Planning and Use of National Territory' states that the non-residential facility (retail space) ratio in mixed-use buildings within urban commercial areas must be at least 10%. Each city and province can raise this percentage to between 15% and 30% through local government ordinances. The increase in vacancies in newly created areas like new towns is also due to properties that have been designated as retail spaces by law without finding tenants.
The government has also stepped in to address the issue of vacant retail spaces. The Ministry of Land, Infrastructure and Transport, the primary government agency, has embarked on two research projects: 'Development of support measures for flexible conversion of buildings' and 'Research on improvement measures for supply and management of commercial land in new towns.' This initiative aims to find solutions for the effective operation and supply of commercial land and retail buildings.
The Anti-Corruption and Civil Rights Commission is currently conducting a survey to identify the problems related to prolonged retail space vacancies. A representative from the commission stated, "The vacancy issue has emerged in conjunction with economic stagnation after COVID-19, and we are currently considering what solutions can be found at the government level."