South Korea’s retail giants, long synonymous with aggressive marketing and bustling sales in prime commercial districts, are now facing an unprecedented challenge: selling their own properties. Major corporations and asset management firms have listed department stores and supermarket buildings, but buyers remain scarce.
The shift to online shopping during the COVID-19 pandemic has eroded the value of physical retail properties. Compounding the problem, a sluggish real estate market has dampened enthusiasm for redevelopment projects.
“While these properties are in prime locations, sluggish domestic consumption has made them less appealing to potential buyers,” said a real estate expert.
Lotte Department Store Dongnae, which opened in 2001 in Busan’s Oncheon-dong district, once thrived by catering to affluent residents, generating annual sales of around 300 billion won ($250 million). However, its fortunes declined sharply after Shinsegae Department Store Centum City opened in 2009, siphoning away customers.
In 2014, Lotte Shopping sold the Dongnae store and four other properties—Lotte Department Store Pohang, Lotte Mart Gunsan, and two others—to CAPSTONE Asset Management under a sale-and-leaseback deal to ease financial pressures.
In 2024, CAPSTONE attempted to sell the Dongnae property as the real estate fund managing it neared maturity. Despite the site’s redevelopment potential, no buyers emerged, forcing the firm to extend the fund’s maturity by three years, to 2027.
“Land prices are high in these areas, but even if redeveloped for residential use, there’s no guarantee of successful sales amid a sluggish housing market,” said a construction industry source.
In November 2024, Lotte Shopping moved to sell Lotte Department Store Centum City, located in Busan’s upscale Centum City district. Opened in 2007, the store has struggled with low sales but was retained for its symbolic significance in the high-end area. Now, liquidity concerns at Lotte Group have made its sale a priority.
However, the property’s development restrictions—limiting its use to retail and cultural facilities—pose a significant obstacle. “Developers aren’t interested in a property that can’t be converted into residential or mixed-use projects,” said a local real estate source.
Other retail properties are facing similar hurdles. KB Real Estate Trust has been trying to sell the Homeplus Pyeongchon store in Anyang, Gyeonggi Province, since 2022, but with no success. The trust recently extended its fund’s maturity to 2027.
Likewise, E-Land Retail’s attempt to sell Gangnam eSquare shopping mall in Seoul for 190 billion won ($160 million) to the listed REIT KOCREF collapsed after shareholder opposition.
According to commercial real estate firm GenstarMate, the number of retail property transactions in South Korea has plummeted—from 42 deals worth 6 trillion won ($5 billion) in 2021 to just eight deals worth 508 billion won ($400 million) in 2023. In the first three quarters of 2024, only three transactions, totaling 196 billion won ($150 million), were completed—most involving properties converted for residential or office use.
With domestic consumption weak and redevelopment prospects dim, experts foresee a prolonged slump in the retail real estate market.
“Most retail properties on the market are underperforming,” said Kim Gyu-jin, head of GenstarMate’s research center. “While redevelopment might seem like an option, the housing market slowdown and rising construction costs have significantly reduced interest in such projects.”
