Garosu-gil a ghost town as small businesses wither with fewer passersby

Commercial zones are entering a death spiral with spikes in vacancies nearly across the board as a lack of foot traffic kills off small businesses, leading to alarming numbers of "For Rent" signs in what were some of the trendiest neighborhoods.

A pedestrian walks past a vacant storefront on Garosu-gil in Sinsa-dong, Gangnam District, southern Seoul, on June 25. [KIM KYUNG-ROK]

At 7 p.m. on June 17, Garosu-gil, a once-trendy street in Sinsa-dong, Gangnam District, southern Seoul, stood eerily quiet. Once packed with unique beauty and fashion shops, art galleries and fine-dining restaurants, the area has lost much of its former buzz.

Only a handful of pedestrians — around 10 — were spotted walking the main 120-meter (393.7 feet) stretch. More than a dozen storefronts sat vacant with “For Rent” signs posted. Some advertised a “ggalsae” contract, which allows tenants to prepay a few months’ rent without a deposit, easing the initial financial burden.

The downturn has halved rental prices in the area. In the late 2010s, rent reached between 1 million and 1.5 million won ($740 and $1,100) per pyeong (3.3 square meters). Now, it hovers around 700,000 won per pyeong.

“This place is dead,” said Yang Seong-won, 58, who runs a real estate agency in the area. “Even with lower rents, the prices aren’t low enough to attract new tenants. Some spots have remained empty for four to five years.”

The backbone of self-employed businesses — local commercial zones — is collapsing. Some districts are facing an even deeper recession than during the Covid-19 pandemic. As commercial zones lose foot traffic, business owners are forced to close shop, which further increases vacancies and accelerates the decline in a vicious cycle.

The average vacancy rate across Seoul’s seven major commercial districts — Myeong-dong, Gangnam, Hongdae, Garosu-gil, Itaewon-Hannam, Cheongdam and Seongsu — hit 15.1 percent in the first quarter of this year, double the rate in 2019, according to global real estate firm Cushman & Wakefield.

Garosu-gil recorded the highest vacancy rate at 41.6 percent. In 2019, the figure stood at just 4.5 percent. Gangnam’s vacancy rate rose from 4.3 percent to 18.9 percent and Hongdae’s from 5.4 percent to 10 percent. Even upscale Cheongdam and nightlife-heavy Itaewon-Hannam have struggled, with rates of 15.7 percent and 10.8 percent, respectively.

Notices for leases are seen at a building in Seodaemun District, western Seoul, on May 28. [YONHAP]

Myeong-dong was the only area to rebound, with its vacancy rate recovering to 5.2 percent — close to its 2019 level of 4.5 percent — buoyed by an 8.6 percent year-on-year increase in foot traffic in the first quarter, according to the Seoul Metropolitan Government’s commercial district analysis service.

Some businesses haven’t formally closed but remain effectively shut. Kim Yoon-gil, who ran a pork barbecue restaurant in Dongdaemun, central Seoul, for 11 years, has kept his doors closed for three months. “I cut my staff from six to one to save on labor, but even that wasn’t sustainable,” Kim said. “The landlord agreed to let me suspend operations without paying rent, since it’s so hard to find new tenants.”

Others are scaling back hours to stay afloat. A dessert cafe owner surnamed Kim said the shop in Sangsu-dong, Mapo District, western Seoul, near Hongdae, now opens at 11 a.m. instead of 8 a.m. due to declining foot traffic.

“Even during the pandemic, this area was bustling,” said Kim. “But closures surged early last year, and the crowds have vanished.”

Rental deposits for business rights, known as key money in Korea, are also falling. The average for commercial spaces nationwide dropped 19.5 percent over five years, from 42.76 million won in 2019 to 34.43 million won last year, according to the Korea Real Estate Board.

A special lease notice is posted on a storefront in Myeong-dong, Jung District, central Seoul, on May 25. [YONHAP]

In Seoul, the figure dipped from 51.3 million won to 49.15 million won. In Gyeonggi, it plummeted by more than 10 million won, from 49.93 million won to 39.04 million won.

The commercial slump reinforces a feedback loop: Small businesses shut down, vacancies increase, the downturn deepens. According to the Korea Federation of Small and Medium Business, the total payout of the “Yellow Umbrella Fund” — a severance scheme for self-employed people — reached a record 717 billion won from January to May this year, more than double the 311.5 billion won paid during the same period in 2020.

The outlook remains grim. In the first quarter, the nationwide rate of new small businesses stood at 2.2 percent, while the closure rate was higher at 2.55 percent — indicating that more are closing than opening.

As a result, commercial properties are also being shunned in the auction market. Although they are typically viewed as stable, income-generating real estate, interest has dried up. According to local auction firm Ggi Auction, the sales success rate for retail properties in Seoul’s seven key districts was just 10 percent in the first quarter.

“While consumer support is necessary in today’s economic slump, small business owners need to survive first in order to revive local commerce,” said Lee Young-ae, a professor of consumer studies at Incheon National University. “What’s needed is not just temporary handouts but policy support that fundamentally strengthens the sector.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff. BY CHOI HYUN-JU,HWANG SOO-YEON,NOH YU-RIM [kim.minyoung5@joongang.co.kr]