As Lotte Department Store returns the operating rights for its Yeongdeungpo branch in Seoul early in a bid to re-tender, a full-fledged process to select a new user for the facility will begin next month. The branch was once a "prime asset" that surpassed 500 billion won in annual sales, but sales fell with the emergence of competing stores nearby.
Major department store rivals say they will not take part in the re-tender for the Yeongdeungpo branch, citing the recently deteriorated market conditions. As a result, some assess that Lotte Department Store's chances of holding on to the Yeongdeungpo branch have risen.
According to the related industry on the 17th, Korea National Railway plans to start the open call next month to select a new user for the commercial facility inside Yeongdeungpo Station that Lotte Department Store currently uses. Before that, the corporation released preliminary specifications for the project in Jul. and gathered on-site feedback from interested companies.
The biggest change in this re-tender is that the operating contract period has been extended to a maximum of 20 years. When the last bid for the facility took place in 2019, the contract terms were up to 10 years (5 years + 5 years). But after the National Property Special Cases Restriction Act was revised in 2020, 20-year (10 years + 10 years) contracts became possible.
The reason the corporation is proceeding with a new bidding process is that the existing operator, Lotte Department Store, applied in Jun. to terminate early the operating rights contract for the Yeongdeungpo branch facility. Opened in 1991, the Yeongdeungpo branch is Korea's first privately funded station department store, which Lotte has operated since it obtained an occupancy permit from the government in 1988. For Lotte Group, it carries weight as the third department store to open, after the main store and the Jamsil store. In the late 2010s, it was also a "prime store" that maintained annual sales of 400 billion to 500 billion won.
After Lotte Department Store's occupancy period for the Yeongdeungpo Station commercial facility ended in Dec. 2017, the government conducted a competitive bid for the facility in 2019 following a two-year grace period. Lotte Department Store regained the usage rights through that process and, through a renewal last year, also secured operating rights through 2029.
However, Lotte Department Store voluntarily returned the remaining operating rights in Jun. It judged that a large-scale investment in a renewal was needed to secure the Yeongdeungpo branch's competitiveness, but the remaining four-year contract term was insufficient.
Accordingly, Lotte Department Store plans to secure long-term operating rights through the re-tender and then proceed with the refurbishment. The Yeongdeungpo branch's business environment deteriorated sharply during the COVID-19 pandemic, and it fell into a slump, with last year's sales declining to about 340 billion won due to the rise of the nearby Shinsegae Department Store Times Square branch and The Hyundai Seoul.
Whether rivals will participate in this re-tendering process is also drawing attention. In the 2019 bid, Shinsegae Department Store and AK Plaza participated, creating a three-way race. The minimum annual rent for the Yeongdeungpo station building proposed by the corporation was about 21.7 billion won, and Lotte bid about 25.2 billion won, higher than that, to win the concession.
However, competitors appear largely uninterested in this acquisition race. With department store market conditions worsening, they are focusing on refurbishing existing stores rather than investing in new branches.
Hyundai Department Store has operated The Hyundai Seoul in Yeouido, adjacent to Yeongdeungpo Station, since 2021 and did not participate in the 2019 bid for that reason. A Hyundai Department Store official said, "We have no plans to participate in this Yeongdeungpo branch bid."
Hanwha Galleria, which is concentrating its resources in Apgujeong, Seoul, is in a similar situation. Hanwha Galleria plans to invest 900 billion won over six years from 2027 to 2033 to remodel its Apgujeong Luxury Hall. A Hanwha Galleria official said, "We have no plans to bid for the Yeongdeungpo Station commercial facility."
AK Plaza jumped into the Yeongdeungpo bid race in 2019 as it was preparing to withdraw its Guro main store, aiming to keep a presence within the Seoul area. But given the group's recent situation, it is seen as unlikely to bid this time. Aekyung Group is currently pushing to sell Aekyung Industrial, a prime affiliate, to improve its financial structure.
Shinsegae Department Store has a record of a fierce contest with Lotte in the 2019 bid. At the time, Shinsegae planned to secure the Yeongdeungpo branch and create a shopping town linked with the nearby Times Square branch and Emart. But the company says it will stay out of this acquisition race. A Shinsegae Department Store official said, "We have no plans to bid."