July 30, 2018 12:16
Seoul's major shopping districts are seeing a raft of store closures as the economic slump takes a deeper bite.
Myeong-dong in downtown Seoul, Tehran-no area in Gangnam and the trendy Hongik University neighborhood have seen store vacancies rise sharply over the last year.
According to the Korea Appraisal Board, vacancies among mid-sized to large stores in the capital rose from 9.6 percent in the second quarter of 2017 to 10.7 percent in the same period of this year. In Myeong-dong it rose from four to 6.4 percent and in Tehran-no from 9.3 to 11.9 percent.
Although vacancies fell in the Hongik University area for larger stores, the opening of big shopping malls drew away customers from small stores in the area, with vacancies surging from 3.7 to 18.2 percent.
In Itaewon in central Seoul, one out of five stores remains vacant after the U.S. Forces Korea headquarters moved to Pyeongtaek, Gyeonggi Province.
There are several reasons for the slump, the main one being a decline in tourists. The number of tourists in the first half of this year dropped 10.9 percent from 2016 to 7.22 million. Chinese package tourists were kept away by the boycott over the Terminal High-Altitude Area Defense battery, and they made up a substantial proportion of customers for pure shopping destinations.
Another reason could be that big businesses have shortened the working week. "The shortened work week resulted in office workers heading home early instead of having company dinners, so sales on Thursdays and Fridays, which are the peak days, fell by 50 percent," the owner of a restaurant in Myeong-dong said. "Sales have dropped 15 percent overall but staff costs keep rising" because of the minimum wage hike.
On the upside, rents have fallen in top locations. According to the KAB, the rising vacancy rates in Myeong-dong have prompted store rents to fall two percent from W914,595 to W896,544 per 3.3 sq.m (US$1=W1,119).
A realtor said, "The number of Chinese tourists has yet to recover, while the shortened working week and minimum-wage hike have scared off small businesses. With few people venturing to open their own store in this slump, the situation is likely to get worse."
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