Apartment complexes pushing reconstruction are increasingly choosing to exclude shopping center unions or not build retail at all. Lawsuits over development profits delay projects, and the risk of unsold units after completion has grown recently.
According to the maintenance industry on the 25th, major reconstruction and redevelopment maintenance sites in Seoul are successively not building shopping centers or are significantly cutting their size. Data from Seoul's Maintenance Project Information Portal show that among 12 reconstruction complexes in the three Gangnam districts—Gangnam, Seocho and Songpa—that have received management and disposal approvals, nine either did not include shopping centers in their original maintenance plans or are proceeding after reducing the number of retail units.
It is not just the Gangnam area. The reconstruction promotion committee for Mok-dong New Town Complex 8 in Yangcheon District ended up resolving to exclude (remove) shopping centers at its inaugural general meeting last month after clashes with retail owners over sales prices. Yeouido Jinju Apartment in Yeongdeungpo District also excluded on-site shopping centers from the maintenance zone, and Yeouido Gongjak Apartment finalized a maintenance plan to cut retail floor area by more than 60%. Redevelopment sites such as Noryangjin District 4 and Noryangjin Districts 1 and 3 in Dongjak District are in the same situation.
Cases are also emerging in which shopping center union members choose to move into apartments instead. Retail union members at Daechi Woosung Phase 1 and Daechi Ssangyong Phase 2, which are pursuing reconstruction in Gangnam District, Seoul, agreed to receive apartment allocations at reconstruction union-member prices instead of retail. The Jamsil Woosung Phase 4 reconstruction union in Songpa District, Seoul, which had planned to build new retail, also shifted to building only apartments to reflect retail owners' views. In principle, shopping center owners can receive allocations only for new retail, but if specified in the union's bylaws, they can also obtain move-in rights.
Until now, in-apartment retail had been a boon that lowered union members' cost shares when sales went well. But with a recent rise in unsold space and vacancies, retail has instead become a headache that forces unions to shoulder maintenance fees and taxes. Even large-complex shopping centers such as Olympic Park Foreon in Gangdong District and Raemian One Perla in Seocho District are struggling to fill vacancies.
In fact, according to the Korean Statistical Information Service (KOSIS), the national vacancy rate for collective shopping centers was 10.4% in the fourth quarter of last year, higher than in the fourth quarter of 2024 (10.1%). In Seoul as well, the vacancy rate rose from 9.1% to 9.3% during this period, putting the collective shopping center vacancy rate at 9% to 10%. With offline consumption subdued through COVID-19 and retail profitability not recovering, unions are concluding that it is more advantageous to build more apartments instead of retail.
There is also a desire to prevent project delays caused by internal union conflict. In the past, to create large complexes, reconstruction proponents tried to win over skeptical retail owners with favorable terms, but during that process, conflicts of interest between retail union members and apartment union members frequently escalated into lawsuits. For example, at the Shinbanpo Phase 2 Apartment in Seocho District, some union members filed suit over bylaw changes that eased the apartment allocation criteria for retail union members, delaying the project schedule for years.
A maintenance industry official said, "As shopping center profitability falls, a growing share of both apartment and retail owners agree with the view that 'we should exclude retail from the start,'" but added, "In that case, they sometimes have to accept the opportunity expense of a reduced volume of general sales, and when the retail scale is too large, aligning interests is difficult, so it is not always easy."