The newly built apartment complex in Jamwon-dong, Seocho-gu, Seoul is struggling to sell its commercial spaces. The apartments are scheduled for occupancy in June, but nearly 30% of the commercial spaces, excluding those owned by the union members, have not been sold. The union has issued a bid notice for selecting a company for a bulk sale since early last month, but with no bids submitted, another notice has been issued.
Within the three districts of Gangnam in Seoul, there are complexes that have yet to sell all their commercial spaces even after seven years of occupancy. Experts point out that the premium for commercial spaces within apartment complexes, which used to dominate resident demand, has vanished due to the offline market slump and relatively high selling prices, making it extremely difficult to sell these spaces to investors.
According to the maintenance industry on the 3rd, the Sinbanpo District 4 Reconstruction and Maintenance Project Association in Jamwon-dong, Seocho-gu, Seoul, issued a bid notice on the 23rd of last month to sell the general sale quantities of 59 commercial spaces (27.6%) out of a total of 213 units, excluding those owned by union members, in the newly constructed 'Maple Xi' complex through reconstruction. The commercial space occupies 4,493 square meters out of a total site area of 158,555.7 square meters, and is built with four basement levels and five aboveground levels. The total floor area of the commercial space is 21,587.3495 square meters. The 59 units planned for general sale are located both underground and aboveground, similar to the units owned by union members.
The union plans to accept bids for the bulk sale firm until the 6th. The first bid notice for the commercial space sale was issued on the 6th of last month but failed to attract bidders, leading to a new notice being issued this time. A union official noted, "We issued another notice because there were no companies participating in the bidding."
Maple Xi, consisting of 3,307 units, is set for occupancy in June. If the bulk sale does not occur, there is a possibility that the commercial spaces will remain unsold during occupancy. The union cannot distribute the required funds for project costs to union members after liquidation without receiving the sale amounts from the commercial spaces, leading to the possibility that the union may face prolonged liquidation issues if the spaces remain unsold.
Generally, commercial spaces newly built through reconstruction were normally individually sold to general investors by the union, similar to apartments. However, recently, there have been unions attempting to sell entirely in bulk, as seen with Maple Xi. With increasing vacancy rates in onsite commercial spaces and difficulties in individual sales, unions have been compelled to adopt this strategy to mitigate the risks of unsold units. Kim Je-gyeong, Head of Team at Tumi Real Estate Consulting, explained, "This is an attempt to reduce the risk of unsold units, even if it means receiving a slightly lower price compared to individual sales."
In fact, even among the complexes considered core locations in Gangnam's three districts, some have not sold all their commercial spaces years after occupancy. Helio City, which consists of 84 buildings and a total of 9,510 units, was completed in 2018 and has yet to sell its reserved commercial units. The liquidation committee of the Garak Shiyoung Apartment Reconstruction and Maintenance Project Association, the project executor of Helio City, is in the process of selling three commercial units located on the first floor and basement level. The minimum bid price ranges from 462 million won (for an area of 24.2 square meters) to 1.431 billion won (for an area of 37.44 square meters). In the October 2023 bid notice, the minimum bid price for 24.2 square meters was set at 490 million won, while that for 37.44 square meters was set at 1.552 billion won, with a reduction of 28 million won and 121 million won, respectively, from the previous minimum bid prices. They had attempted to sell the units in the October bid last year but were unsuccessful and continue to seek buyers.
Experts point out that in the stagnant market for commercial spaces within apartment complexes, unions are maintaining high selling prices.
Park Ji-min, head of the Woolyung Housing Subscription Research Institute, stated, "As the economy worsens and the recession of small businesses continues, the selling prices for commercial spaces in newly built apartments remain quite high. In new towns, commercial spaces on the first floor are sold for around 40 million to 60 million won per 3.3 square meters, meaning that a space of about 10 pyeong (33 square meters) costs between 400 million and 600 million won." Park added, "Gangnam, Seoul, is even more expensive, with many places exceeding 100 million won per 3.3 square meters, and this high pricing for selling has led to elevated rental costs, causing only a few commercial spaces, like real estate agencies that can afford the rents, to open, resulting in an increase in vacancies and a lack of diverse commercial districts."
Yoon Ji-hae, head of the Research Team at Real Estate R114, commented, "Commercial spaces used to mainly consist of shops selling groceries or consumer goods, but this market has shifted significantly to online shopping platforms, leading to an extreme slump in the offline sector. Even in this situation, there is an oversupply of commercial spaces within complexes, resulting in increasing unsold units and vacancies." Yoon added, "In the past, commercial spaces within apartment complexes could monopolize some shopping demand from residents, but these days, most complex commercial spaces are located along major roads, serving not just residents but external visitors as well, losing the premium of being exclusive to residents and having to compete with other commercial spaces along the main roads, which is another reason for unsold units."