Cushman & Wakefield, the world’s largest privately held real estate firm, presents 2013 Seoul Retail Market outlook and summarise its key findings on 3 major retail districts as below.
The domestic recession has resulted in a decrease in the revenues of expensive brands despite the recent boom in SPA (Specialty retailer of Private label Apparel) brands. Not only are global SPA brands like Zara, H&M, Forever 21 and Uniqlo competing to expand their retail stores, domestic SPA brands such as E-land’s Mixxo and Cheil Industry’s 8seconds are also competing to increase their retail stores around major shopping areas like Myeongdong, Gangnam Station and Garosugil. There are still many SPA brands that are anxious to find good-sized stores before launching their brands in Korea, thus the major retail districts in Seoul are expected to maintain the uptrend in rents.
SPA brands are seeing profits boom on sales, whereas luxury brands are facing a decrease in the revenues by the domestic economy recession. The outlook for SPA is still bright despite the concern that the domestic economy recession could affect the SPA brands’ prosperity. It is forecast that the SPA market share will increase to be around KRW20 trillion by 2015.
Up to date, the domestic SPA market is being dominated by foreign SPA brands such as Zara, Mango, H&M, GAP and Uniqlo. These brands comprise 80% to 90% of the SPA brand market in Korea. With the recent entry of large domestic fashion brands into this market, the competition has become fiercer as the brands are trying to tighten their grip on the market in major retail districts such as Garosu-gil, Myeong-dong, and Gangnam Station.
As one of the most popular shopping districts among foreign visitors like Japanese & Chinese, Myeong-dong has always been known to be a competitive spot for all SPA brands. Last year, Uniqlo introduced its new store of 3,966 sq m, which is the largest its flagship store in Asia. Meanwhile, H&M had two stores and Zara had three ones in Myeong-dong previously.
Following Myeong-dong and Garosu-gil, Gangnam has also become the main battlefield amongst the SPA brands recently. The most expensive area in Gangnam is where New York Bakery used to locate, which has been taken up by new local SPA brand, ‘8 Seconds’. This building’s lease price is the most expensive in the neighbourhood of Gangnam, with the size of 1,455 sq m of 4 floors, big enough to compete against global brands like Zara and Uniqlo.
On Garosugil, Hollister opened its first flagship last week (Feb., 1st ) and H&M will have another opening in coming March. Zara, Forever 21, Massimo Dutti and Smile Market(Local brand) are thriving in Garosugil. This area used to be filled with coffee shops but it is now transforming into a Mecca for SPA brands as ‘it’ place for shoppers in their 20’s to 30’s.
The domestic SPA brands are struggling to survive by expanding their stores as many as possible. Consequently, most of the new retail stores end up outside of Seoul because there is not enough supply to meet their demands. This limits the companies’ expansion plans and this shortage will continue until new retail premises are provided.