South Korea’s largest Western-style mall outperforming expectations

Publish Date: December 14, 2016

Starfield-Hanam

Few retail locations have regular visitors arriving shortly after dawn. But then, Starfield Hanam is no ordinary mall. This mall, east of Seoul, about 30 minutes from the glitzy Gangnam District, relies on distinctive features to draw footfall. At 6 a.m. its Aquafield, a waterpark and massage complex that includes an infinity pool, opens for business, offering visitors the chance to relax before they have even started their day.

Starfield Hanam is a 456,000-square-metre (4.9 million-square-foot) retail location with a gross leasable area of 158,000 square metres (1.7 million square feet), jointly developed by the Shinsegae Group and Taubman Asia. It opened in September as South Korea’s largest Western-style shopping mall, the nation’s second-largest retail destination (the largest being Lotte World Mall, which measures 826,000 square metres). Starfield Hanam houses some 800 brands as well as hypermarkets, dining establishments and a wealth of cinema, sports and other entertainment facilities. Korean retail sites are typically vertical and dominated by department stores, notes Paul Wright, group vice president of leasing at Taubman Asia. During the inauguration of Starfield Hanam, the developers expected 12 million visits annually. Wright says they are well on track to meeting that goal and that the initial estimate was comfortably conservative. To accommodate those numbers, the mall has 6,200 parking spaces ready for shoppers seeking a more comfortable experience than the density of central Seoul normally affords.

The mall’s architecture is imposing but warm. With a 35-metre-high ceiling and glass sunroofs providing lots of natural light, the building’s curves seem to embrace shoppers, with just a touch of grandiosity. Shopper mobility is maximized too, given a minimal number of columns. The idea was to create a lifestyle shopping experience in a controlled environment less intense than in other parts of Seoul, Wright says. Large, bright, open spaces and plenty of food and entertainment offerings means that shoppers might easily spend six to eight hours on the premises. Should they grow fatigued from walking, several types of massage facilities and spas are available.

Many of the major Japanese, European and U.S. fast-fashion, luxury and lifestyle retailers typically found in key retail locations have set up shop here. Entertainment options are diverse, including an 11-screen cinema and a sporting complex with indoor rock-climbing walls. Car makers think they can capitalize on walk-in traffic, so BMW, Hyundai and Tesla are among those that have set up showrooms.

The mere three-level format is unusual in the Korean market, where verticality is important to keeping the footprint small in a place with such costly real estate. According to JLL, Seoul’s Myeong-dong neighborhood was the Asia-Pacific region’s third-most-expensive area for high-street rents, tallying over €5,611 per square metre yearly. But perhaps it is precisely the change of pace that Koreans are after. “Three conglomerates — Lotte, Shinsegae and Hyundai — operate dozens of department stores and exercise their influence over retailers,” said Miah Young, senior director of retail marketing at Savills Korea. “Korean customers became used to shopping in department stores operated by these three conglomerates, but customers have changed and expect advanced and diverse shopping environments and formats due to the dramatic increase of overseas travel and their shopping experiences abroad.”

Shinsegae Group and its competitors are building lots of such shopper-friendly malls. Altogether, 16 facilities came online last year, or will be within the next three years, in such satellite cities as Ansung, Busan, Daegu, Incheon and Songdo. Young points out that the three conglomerates are racing to secure a foothold beyond Seoul by remodeling or expanding their existing department stores as “mega shopping malls.” Yet the Korean market is not saturated yet, she says, because Korean shoppers are far from satisfied with their current options.

Ever since a period of sluggish spending and sliding consumer sentiment, Korea has seen a slow but steady improvement in the retail sector. PwC reports that Korean retail volumes were at $307 billion in 2014 and $331 billion in 2015, and the firm is projecting $343 billion for 2016, $357 billion for this year and $378 billion for next year.

Exciting places to shop and relax are just what are needed to counteract the rise of e-commerce shopping, observers say. Government stats are projecting that e-commerce in the country will reach 9.8 percent of total retail sales for 2016, making South Korea the third-largest e-commerce market in the Asia-Pacific, after China and Japan. A Cushman & Wakefield research report identifies the Seoul retail sector as a growth market in the coming year. This holds true for other Korean cities with equally high standards of living and plenty of disposable income — and a bit more room to breathe. The Korean government is “encouraging consumption,” according to Young, “and consumer confidence is slowly improving.” Wright, who notes that there is no oversupply in any of the cities in Korea, concurs, asserting that Taubman Asia sees “significant opportunities in the Korean retail market in terms of Seoul and other areas.” — Brady Ng


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