Consumer sentiment index sees a rebound after five months

• The CSI showed an upward trend, reaching 99.5 in December amid gradually stabilising oil prices. Still, the figure remains below 100, indicating a prevailing pessimistic market outlook due to inflated agricultural prices during winter. Retail sales recorded -4.5% in October and -0.3% in November, y-o-y. Same-department store sales recorded -2.6% in October and +6.8% in November, y-o-y.
• In November, the number of monthly overseas tourists reached 1,114,990, up 142.4% y-o-y. In the same month, 221,469 Chinese tourists visited Korea, marking a 816.1% y-o-y growth. Throughout 2023, Japanese tourists continued to be a key nationality in the monthly tally of foreign visitors, consistently making up the largest proportion.

Vacancy rates of both Shopping Malls and High Streets rise

• No new retail assets were introduced to the JLL basket in 4Q23.
• The vacancy rates of Prime Shopping Malls climbed by 10 bps q-o-q, primarily due to rising vacancies in Noon Square. For High Streets, Garosugil and Cheongdam’s vacancy rates ticked up by 438 bps and by 489 bps q-o-q, respectively, while Myeongdong exhibited the most active leasing activity among the districts, resulting in a decrease in vacancy by 791 bps q-o-q.

A hypermarket deal concludes

• Both Shopping Malls and High Streets saw an increase in net effective rents by 1.2% and 0.7% q-o-q, respectively. Looking at High Street districts, rents in Myeongdong showed the largest increase of 1.8% q-o-q, while those in Gangnamdaero and Hongdae rose by 1.0% and 0.5% q-o-q, respectively. In 4Q23, Cheongdam was the only High Street that recorded a decrease in net effective rents by 0.5% q-o-q.
• Market yields for both Shopping Malls and High Streets rose 10 bps, reaching 6.2% and 6.0%, respectively. A notable transaction was the purchase of Megabox Square Seongsu by Krafton from JoongAng Multiplex Development for KRW 243.5 billion. Krafton previously acquired E-mart Seongsu branch in 2022. Also, JR Jegi Jinro Mart acquired Lotte Mart Yangju branch for KRW 37.2 billion from Lotte Shopping.

Outlook: Active gatherings complement slower return of Chinese tourists

• While the actual return of Chinese group tourists has been slower than expected, diversified nationalities of tourists visiting Korea and increased in-person gatherings are expected to boost retail sales. With the ongoing recovery of export conditions and rising expectations that the Fed will end the hawkish cycle and turn dovish, consumer purchasing power is expected to rise to a certain extent.
• Although a few notable deals have been witnessed in the quarter, there is still a lack of active participation from financial investors in the retail investment market. Several hypermarket deals have been unsuccessful in finding a buyer despite multiple rounds of bidding. Meanwhile, efforts to secure funds from large retailers through the sale of assets have been consistently observed.