The issue of vacant commercial properties is worsening nationwide. Even areas once considered bustling, such as college towns and city halls, are struggling with vacancy problems. One in ten commercial properties nationwide is currently vacant.
The rising cost of living has led to a slowdown in consumption, causing an increase in the number of business closures among self-employed individuals, which has been analyzed as a serious problem for vacant commercial properties. The growth of online non-face-to-face consumption is also a reason behind the decrease in demand for commercial leases.
According to the Korea Real Estate Board on the 18th, the national vacancy rate for medium and large commercial properties was recorded at 13.03% in the fourth quarter of last year. The vacancy rates for shopping complexes and small commercial properties were 10.09% and 6.74%, respectively. On average, one in ten commercial properties nationwide is vacant.
◇Seoul's downtown also faces serious ‘vacancies’…regional commercial properties hit hard by population decline
Even in Seoul, with a population nearing 10 million, the issue of vacant commercial properties is serious. The vacancy rate for shopping complexes in Seoul reached 9.08% in the fourth quarter of last year. Among them, the vacancy rate at Yongsan Station was the highest. The vacancy rate for properties located at Yongsan Station reached 37.61%. Following that, the vacancy rate in Cheongnyangni was high at 27.59%, and Yeongdeungpo recorded a vacancy rate of 23.90%.
Gangnam could not escape the issue of vacant commercial properties either. The vacancy rate for shopping complexes located at Nonhyeon Station was recorded at 16.76%. The vacancy rate for small commercial properties in Cheongdam-dong was 14.44%.
The situation in the Gyeonggi area was better compared to Seoul. Gyeonggi's vacancy rate was recorded at 5.42%. However, the situation in newly constructed cities in Gyeonggi Province was different. The vacancy rate in the Namyangju Dasan New Town was 13.58%. The vacancy rate in the Gurye area of Gimpo Han River New Town was 11.36%, and 7.38% of commercial properties in Baegot New Town were also vacant.
Regions facing population decline are experiencing even more serious vacancy issues than the metropolitan area. The area with the highest vacancy rate nationwide was North Gyeongsang, with a rate of 26.54%. This means one in three commercial properties is vacant.
Following North Gyeongsang, the vacancy rates were as follows: ▲Jeonnam 23.97% ▲Ulsan 20.65% ▲Gangwon 17.01% ▲Jeju 16.35% ▲Jeonbuk 15.93% ▲Chungbuk 15.16% ▲Sejong 14.52%. Regions with lower vacancy rates than the national average included ▲Daejeon 9.18%, ▲Busan 8.48%, ▲Incheon 8.01%, and ▲Gwangju 7.53%.
In non-metropolitan areas, many commercial properties near university towns, city halls, and terminals that were once bustling are now vacant. For medium and large commercial properties, the vacancy rate in front of Chonnam National University in Gwangju reached 37.7%. Small commercial properties in front of Pusan National University were also 23.37% vacant. The vacancy rate for properties near Dangjin City Hall in Chungnam was 14.61%, and the vacancy rate for the commercial properties at Masan Station Bus Terminal in Gyeongnam was 28.01%.
In particular, there appeared to be no signs of improvement in the vacancy issues of local innovation cities. The vacancy rates in the Gyeongbuk Gimcheon Innovation City and the Gwangju Jeonnam Innovation City were recorded at 42.13% and 42.08%, respectively. The vacancy rates in the Chungbuk Innovation City and the Jeonbuk Innovation City were 29.24% and 25.87%, respectively.
◇Expansion of online shopping and oversupply of commercial properties impacting landlords
The vacancies in commercial properties seem to be a result of the expansion of online shopping following COVID-19. Additionally, an increase in business closures among self-employed individuals due to economic recession has been analyzed as a contributing factor to rising vacancy rates. In particular, areas heavily reliant on accommodation and food services exhibit a high likelihood of vacancies.
Through the Korea Real Estate Board's 'Factors Influencing Vacancy Rates and Policy Measures,' it was confirmed that “areas with a high proportion of commercial vacancies tend to have a higher ratio of food service businesses and a lower ratio of educational services and health and welfare businesses,” and that “the high proportion of accommodation and food services may be a phenomenon or result of increased vacancies.”
In particular, in newly constructed cities, oversupply of commercial properties and usage regulations are cited as causes of the high vacancy rates. Commercial land in these new towns is determined by district planning, allowing an average of about 10 different uses. There are also regulations for building floors. In some new towns, commercial properties can only be used for restaurants, resulting in high vacancy rates.
This increase in the vacancy rate eventually lowers the rental yields for property owners. The rental price index for large and medium commercial properties was recorded at 99.8 points in the fourth quarter of last year, while small commercial properties and shopping complexes were at 99.7 points. This represents a decline of 0.16% for large and medium commercial properties, 0.50% for small commercial properties, and 0.44% for shopping complexes compared to the previous year. The income revenue representing rental income was also low, with large and medium commercial properties at 0.81%, small commercial properties at 0.74%, and shopping complexes at 0.99%.
A 68-year-old individual, Mr. A, who owns commercial properties in the metropolitan area, said, “As the commercial market has completely shifted online, it’s becoming increasingly difficult to rely on rent for a stable retirement,” adding, “I thought the tenant on the first floor of the building would be stable since it's a large corporation, but even big companies are saying they will switch to cheaper places since offline sales are challenging.” He further noted, “It seems that finding tenants will be difficult, and I’m worried because I have to bear the full burden of the building loan interest.”