Illegal subleasing brings hardships for shopkeepers

Kim Jeong-nam, 51, sells handbags in an 18-square-meter shop in the underground shopping arcade of Yeongdeungpo Station in southwestern Seoul.

Recently, she has taken to Chinese herbal medicine because of the stress of trying to make ends meet.

“The monthly rent has increased by 2 million won ($1,784), and customers are scarce,” said Kim, heaving a sigh, on Sunday.

Kim opened up shop in May, but after renovations to the underground shopping center in October, monthly rents for the 80 stores have skyrocketed - sometimes an increase as high as 3 million won a month.

To keep her business, Kim had to pay a 100 million won “premium” fee and another 100 million won for the deposit. On top of that, she pays 8.5 million won each month for the rent.

“Every day, sales have to exceed 6 million won to break even, but I’m earning only 3 million won and at the brink of going under,” Kim said.

The story is similar in Gangnam Station’s sprawling underground shopping center, which reopened in July after undergoing renovations. Over the past two to three months, the 210 shops in the station have faced an increase of as much as 1.5 million won in their monthly rent.

Park Min-gi, 48, said that he gave up trying to set up a store in Gangnam Station.

“The monthly rent for a 40-square-meter store on the main corridor is 20 million won. Compared to the monthly rent at Gangbyeon Station, which is 6.5 million won per month, the cost was so high that I considered reporting it to the Fair Trade Commission.”

The spike in rent has come as landlords try to recoup the cost of renovations - 100 million won each - which they paid for through their corporate bodies that operate the underground shopping arcades.

“The owners just have to pay the Seoul Metropolitan Government a monthly rent of 2 million won, but we have to shoulder the costs of the remodeling,” a Gangnam Station storekeeper surnamed Kim, 54, said. “Already there are people who are trying to leave because they can’t break even.”

Experts say that illegal subleasing and the practice of charging “premium” fees are creating a deep-rooted structural problem in the underground shopping arcades.

Originally, underground subway station stores were under the ownership of the Seoul Metropolitan Facilities Management Corporation, Seoul Metro and the Seoul Metropolitan Rapid Transit Corporation, and the corporations would put the retail space on the market at low prices.

But with the increasing profitability of underground subway station stores, the new owners began leasing the space for a high monthly rent, leading to illegal subleases.

“Even real estate brokers get involved in the middle, making life more difficult for ordinary people,” said Kim, 52, a shopkeeper of a menswear store in Yeongdeungpo Station.

Meanwhile, the Seoul Metropolitan Government has continued to contract out more subway station shopping arcades to the private sector.

An official from the Seoul Metropolitan Facilities Management Corporation warned against subleasing retail space in underground arcades.

“Subleasing is illegal, and the Corporation will not allow any store to sublease,” he said, adding that the corporation investigates for taxable income to root out the illegal practice. But he conceded that it was “difficult to monitor.”

“Retailers should be aware that subleasing is a dangerous contract with no legal guarantees,” he said.

By Lee Ji-sang, Noh Jin Ho [sarahkim@joongang.co.kr]