What: Seoul's retail sector experiences structural transformation as Garosu-gil hits 41.2% vacancy rate while Myeongdong maintains resilience at 4.4%, reflecting deepening market polarisation.

Why it is important: The divergent performance of retail districts highlights a critical transformation in South Korea's retail sector, where success increasingly depends on adapting to new consumer behaviours, including the rise of single-person households and the shift to online shopping.

Seoul's retail landscape is undergoing a significant transformation amidst economic stagnation and reduced consumer spending, according to Cushman & Wakefield Korea's Q4 2024 report. The analysis reveals a complex pattern of market polarisation, with the average vacancy rate for prime shopping areas standing at 16.6%, marking a modest 0.5 percentage point decrease from the previous quarter. The contrast between districts is particularly striking, with Garosu-gil recording the highest vacancy rate at 41.2%, whilst Myeongdong demonstrates remarkable resilience at 4.4%.

Other major retail zones, including Cheongdam, Gangnam, and Hannam-Itaewon, maintain vacancy rates above 10%, highlighting the sector's ongoing challenges. The outlook remains uncertain as persistent inflation, a strong US dollar, and increasing household debt burdens are expected to further impact consumer expenditure throughout 2025, particularly affecting discretionary spending in leisure and shopping sectors.

IADS Notes: The current slowdown in Seoul's retail market, as evidenced by the 16.6% average vacancy rate in prime shopping areas, reflects broader transformative trends in South Korean retail. In February 2025, young consumers are increasingly abandoning luxury brands for affordable alternatives, while the rise of single-person households (42% of total) is driving demand for personalised services. This shift coincides with online shopping surpassing in-store sales for the first time, capturing 50.5% of the market. Retailers are responding with innovative strategies, as seen in Shinsegae's successful "House of Shinsegae" concept, which achieved a 149.9% year-over-year increase in restaurant sales.

Department stores are adapting their business models, revising VIP programs and expanding into e-commerce luxury retail. However, the sector faces significant challenges, with growth falling below 1% amid increasing polarisation between metropolitan and regional stores. The stark contrast between Myeongdong's 4.4% vacancy rate and Garosu-gil's 41.2% exemplifies this polarisation, suggesting that while some premium locations maintain resilience, the broader market requires fundamental restructuring to address changing consumer behaviors and economic pressures.

Seoul’s retail market slows amid weakened consumer spending