"Even Reasonable Rents Are Useless"... The Collapsing 'Prime Commercial Area' Myeongdong

Myeongdong, with a High Proportion of Tourists, Hit Hard by COVID-19
Sales Plummet, Unable to Afford Monthly Rent of Tens of Millions
Want to Close Business but No Successor Tenants
Small Building Auctions Also 'Cold Reception'... Difficult to Generate Profit

Seoul's Myeongdong, known as the "No. 1 Commercial District in South Korea," has been hit hard by the spread of the novel coronavirus infection (COVID-19). With a significant decrease in tourists, the streets of Myeongdong remain quiet even on weekday afternoons. (Photo by Moon Jewon)

[Asia Economy Reporter Moon Jiwon] "Sales have dropped by 90%, so do you think cutting rent in half will improve the merchants' situation? Tenants even dislike the so-called 'good rent.' Many are putting their stores up for lease, but there are no tenants to take over." (Myeongdong A Real Estate Agency official)

Seoul's Myeongdong, known as the "Number One Commercial District in South Korea," is collapsing due to the economic downturn caused by the COVID-19 pandemic. With about 85% of its customers being foreign tourists and monthly rents reaching tens of millions of won, the sudden recession has led to a surge in vacant stores.

On the afternoon of the 8th, vacant stores with "For Lease" flyers were seen everywhere in the Myeongdong area. Most of these were clothing stores or restaurants that used to be crowded with tourists before the COVID-19 outbreak. Some stores had hastily closed, leaving "SALE" banners hanging on their doors. According to local real estate agencies, due to the sharp decline in sales, existing tenants are increasingly trying to find someone to take over their leases for the remaining contract period before closing down.

However, real estate agents say it is not easy to find new tenants. Depending on location and contract terms, monthly rent for first-floor stores typically ranges from at least 10 million won to as much as 100 million won. While sales have dropped, tenants still have to pay rent every month, increasing their financial burden over time.

A representative from B Real Estate Agency near Myeongdong Station said, "Since there is no demand for stores, merchants are in a state of despair," adding, "Recently, many real estate agencies have closed due to a lack of lease transactions."

The situation is even more severe for alleyway or second-floor stores. Most are in a state of suspended operation, with key money that once reached hundreds of millions of won being drastically reduced or waived altogether, yet even then it is difficult to find tenants. Many store owners have lowered rents by 20-50%, but from the tenants' perspective, it is hard to cover even labor costs, let alone rent.

C, who runs a clothing store here, said, "Even when other commercial districts were struggling, Myeongdong did well, but this is the first time in over ten years of business that I've seen such a drop in foot traffic," sighing, "During MERS, it was tough for about three months but then recovered; I don't think that will happen this time."

Store in Myeongdong with a rental inquiry posted (Photo by Moon Jewon)

The crisis in Myeongdong is also reflected in the auction market. According to the industry, a small three-story building in the densely packed Myeongdong shopping area was put up for auction on the 1st for about 5 billion won but failed to sell. It is rare for buildings in Myeongdong to be auctioned, and even when properties occasionally come onto the market, they have been sold at prices above market value, making this failure unusual, according to industry insiders.

The head of D Real Estate Agency in the area said, "Three years ago, if this property had been auctioned, many people would have bid," adding, "Since it is difficult to even collect rent properly now, even if the bid price is low, it will not be easy to find an owner."

Before the COVID-19 outbreak, the expected investment return rate for commercial properties in Myeongdong was about 3.5-4%. For a building priced around 4 billion won, monthly rent in the mid-to-high tens of millions of won was expected without vacancies, but it is now difficult to expect that under current conditions. The head of E Real Estate Agency in the area predicted, "If the COVID-19 situation prolongs, monthly rents in Myeongdong are likely to enter an adjustment phase."

Quiet Myeongdong Street (Photo by Moon Jewon)

This content was produced with the assistance of AI translation services.