Ground floors go dark as national retail vacancy rate tops 13%

The average vacancy rate for general retail spaces nationwide has surpassed 13 percent, with 16 of the country's 17 cities and provinces recording higher vacancy rates than five years ago.

Data submitted by the Korea Real Estate Board to Hwang Hee, a Democratic Party of Korea lawmaker on the National Assembly's Land, Infrastructure and Transport Committee, show that the national retail vacancy rate rose 1.4 percentage points over five years — from 11.96 percent in the first quarter of 2021 to 13.36 percent in the second quarter of this year.

The second-quarter figure marked the seventh consecutive quarter of increases since the third quarter of 2024, reaching its highest level since 2021. Every region except Ulsan posted a higher average vacancy rate compared with the first quarter of 2021.

Sejong had the highest vacancy rate in the second quarter at 22.79 percent, followed by Daegu at 17.84 percent, North Chungcheong Province at 17.43 percent, North Gyeongsang Province at 16.66 percent and Gwangju at 16.50 percent.

Even ground-floor retail — typically the most sought-after commercial space — saw its national vacancy rate climb from 4.79 percent in the first quarter of 2021 to 6.68 percent in the second quarter of this year, underscoring a broad contraction in retail activity.

By property type, the vacancy rate for mid- to large-size retail spaces rose from 12.98 percent to 14.33 percent over the same period, while the rate for small-scale spaces increased from 6.41 percent to 8.47 percent. In Sejong, the mid- to large-size vacancy rate reached 29.68 percent, meaning roughly three in 10 such spaces sit empty.

Operating conditions for small business owners — who make up the majority of retail tenants — have also deteriorated.

The Ministry of SMEs and Startups analyzed National Tax Service statistics and found that 975,681 businesses closed last year, putting the closure rate at 8.64 percent. "Poor business performance" accounted for 50.4 percent of all stated reasons for closure.

As population decline and sluggish commercial activity drive up vacancies in regional areas, the government has launched revitalization efforts. The Ministry of Culture, Sports and Tourism, the Ministry of Land, Infrastructure and Transport and the Ministry of SMEs and Startups are jointly running a hub-focused "RE:CORE" project aimed at transforming old downtown districts into new spaces and restoring vitality by nurturing youth entrepreneurs, startup founders, artists and local content creators.

The Ministry of Land, Infrastructure and Transport has also unveiled measures to boost housing supply in the Greater Seoul area, including easing regulations on urban-type residential buildings and converting vacant retail spaces, offices and knowledge industry centers into residential use to increase the supply of non-apartment housing.

"The rise in retail vacancies is not a problem confined to specific regions — it is a signal from the everyday economy reflecting a complex mix of changes in domestic demand and the consumer environment," Hwang said. "Detailed analysis and a targeted response are needed to ensure that policies supporting small business owners and restoring the everyday economy actually work in line with real conditions on the ground."