'MZ·Luxury Boom' Only Cheongdam Among Seoul's 6 Major Commercial Districts Sees Vacancy Rate Drop After COVID-19

Luxury Revenge Spending Lowers Cheongdam Vacancy Rate to 14.0%
Myeongdong, Cut Off from Foreign Visitors, Has Highest Rate at 52.5%

[Provided by Cushman & Wakefield]

[Asia Economy Reporter Noh Kyung-jo] The luxury goods market has experienced explosive growth due to changes in consumer behavior caused by the COVID-19 pandemic. With overseas travel restricted, suppressed consumer desires manifested as luxury revenge spending. This affected commercial district landscapes, with areas in Seoul such as Cheongdam and the Itaewon Station-Hangangjin Station vicinity?where luxury brands and high-end restaurants are concentrated?enjoying a boom. In contrast, Myeongdong and Garosu-gil, which heavily rely on foreign tourists, saw a sharp increase in vacancies.

According to the "2022 Seoul Retail Street Commercial District Report" by global real estate consulting firm Cushman & Wakefield on the 10th, as of the second quarter of this year, the average vacancy rate across Seoul's six major commercial districts (Myeongdong, Hongdae, Hannam-Itaewon, Cheongdam, Garosu-gil, Gangnam) was 23.7%, down 1.9 percentage points from the previous quarter. Although this is an improvement from the peak vacancy rate of 25.8% recorded in the fourth quarter of 2021 after the COVID-19 outbreak, it has not yet returned to the pre-pandemic average of 7.5% in 2019.

The commercial district most severely impacted during the pandemic was Myeongdong. The vacancy rate, which was 4.5% before COVID-19, surged to 23.2% in 2020 and 49.9% in 2021, reaching 52.5% in the first half of this year. The large-scale withdrawal of cosmetics stores in Myeongdong, which heavily depended on Chinese tourists among foreign visitors, contributed significantly to the rising vacancy rate. The report noted that approximately 56% of vacancies in Myeongdong since 2020 were from cosmetics stores.

Next, Garosu-gil's vacancy rate was high at 28.7%. Similar to Myeongdong, the sharp decline in foreign tourists led fashion and beauty brands that had entered Garosu-gil to gradually withdraw.

On the other hand, Cheongdam was the only one among the six major commercial districts where the vacancy rate decreased after COVID-19, thanks to the growth of the luxury market. The vacancy rate in Cheongdam rose to 20.8% in 2019 when the luxury industry was sluggish but dropped to 14.0% in the first half of this year. The main consumer base for luxury goods expanded from the existing middle-aged and older generations to include the MZ generation (born from the early 1980s to early 2000s).

The area with the lowest vacancy rate was Hannam-Itaewon at 10.8%. Analysis of credit card sales data showed that sales in Cheongdam and Hannam-Itaewon increased by more than 20% year-on-year in the first half of this year, while Myeongdong was the only district to experience a sales decline during the same period.

The report attributed the growth of the luxury market and the resilience of commercial districts during the pandemic to the so-called "flex culture," centered around the MZ generation. According to the Ministry of Trade, Industry and Energy, sales of luxury and other famous overseas brands recorded 29.1% growth as of July this year, following 18.8% growth in 2021 and 32.5% in 2020.

Cushman & Wakefield stated, "According to Statistics Korea, mobile population movement in August this year recovered to about 99% of the level in August 2019, nearing pre-pandemic levels." However, they added, "Recently, inflationary pressures, which could negatively affect the recovery of private consumption, have newly emerged, so vigilance cannot be relaxed."

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