Shinsegae's next real estate dream: A 'Korean Roppongi Hills'

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Shinsegae's next real estate dream: A 'Korean Roppongi Hills'

Published: 10 Mar. 2025, 17:40 Updated: 10 Mar. 2025, 18:34

Audio report: written by reporters, read by AI

G-Dragon's music video for “Too Bad,” featuring Anderson .Paak, is shown on Shinsegae Department Store's branch in Myeong-dong, central Seoul, on Feb. 26. [YONHAP]

Shinsegae Inc., under chairman Chung Yu-kyung’s new leadership, is advancing its integrated property development business as it gears up for an imminent spinoff from the Shinsegae group.

The project is envisioned to create urban complexes that encompass residential, commercial and retail spaces, including hotels, department stores and offices, near transportation hubs, such as bus terminals and subway stations — much like Japan’s well-known Roppongi Hills.

Shinsegae’s property rental and management subsidiary has asked to hold a vote to change the firm’s name from its current Shinsegae Central City to Shinsegae Central at the upcoming shareholders’ general meeting on March 20, according to insiders in the retail and real estate sectors.

“We plan to lead the group’s high value-adding real estate projects, such as those for residential, office, hotel and retail spaces that make use of the group’s core properties, and by doing so, become its core affiliate,” Shinsegae told major shareholders in its general meeting convocation notice.

“We will delete the word ‘city’ that has a connotation that limits it to large cities like Seoul from the company name and advance as a comprehensive real estate development firm,” the notice said of the name change.

Visitors at a cafe on Shinsegae Central City's first floor [SHINSEGAE CENTRAL CITY]

Shinsegae Central City’s primarily role was to operate Shinsegae Department Store’s Gangnam branch in Banpo-dong, Seocho District, southern Seoul; JW Marriott Hotel; and Shinsegae Central City, a complex that comprises intercity bus terminals.

Following the change, the firm will now work as a developer to purchase land, plan development, rent, sell and directly operate properties.

It will be headed by Park Joo-hyung, CEO of Shinsegae and Shinsegae Central City.

A Shinsegae Group veteran of 40 years, Park has worked as Shinsegae Central City’s CEO for the nine years since 2016. The firm posted better profitability during his tenure; last year’s sales, at 375.3 billion won ($258.3 million), were up 7.3 percent on year while operating profit gained 7 percent to reach 85.7 billion won. He assumed the Shinsegae holding company’s CEO role in September 2023, presumably to plan the firm’s real estate ambitions alongside chairman Chung.

Retail insiders say the move is Shinsegae pinning integrated property development as a measure to solve its core, yet faltering, department store business. Department stores lead the way in offline retail but have been going downhill as they lose business to e-commerce rivals. Online marketplace sales, which had accounted for 32.4 percent of all retail sales in 2023, jumped to make up 50.6 percent last year, according to the Ministry of Trade, Industry and Energy. Department stores’ proportion, on the other hand, shrank from 22.9 percent to 17.4.

Shinsegae Department Store's Gangnam branch in Seocho District, southern Seoul [SHINSEGAE]

Shinsegae owns a lot of land across the country on which it can construct commercial facilities. Most of these plots, located near intercity bus terminals or subway stations, get a lot of foot traffic. The firm purchased a 95,630 square-meter (23.6-acre) compound near Gwangju Central Bus Terminal in Gwangcheon-dong, Seo District, Gwangju last year; a 59,600 square-meter lot near Incheon National University Station, a stop on Incheon Subway Line 1 in Songdo International Business District in 2016; and 24,332 meter-square site in a commercial district in Ulsan in 2013. A redevelopment plan for Shinsegae Central City in Banpo-dong is also in the works.

Shinsegae plans to create integrated property complexes that house department stores, hotels and retail and living and office spaces on these compounds. It’s a model similar to Japanese property developer Mori Building’s construction of Roppongi Hills, Omotesando Hills and Azabudai Hills. Chairman Chung is said to have visited Azabudai Hills in Tokyo in January and met with a Mori Building official as part of her benchmarking efforts in Japan, the United States and Europe.

Property development is also something of a necessity for Shinsegae Inc. as it splits off from the group’s Emart division, led by chairman Chung Yong-jin, Chung Yu-kyung’s older brother. Shinsegae Group’s entire real estate portfolio has so far been managed by Shinsegae Property, which is under the elder Chung.

It’s also becoming difficult to delay the development of properties in Incheon and Gwangju. City governments are urging firms to under rapid development to revitalize regional economies.

Real estate insiders say Shinsegae Inc.’s core business could change, if things go to plan. Developers typically make a profit by purchasing land and selling it once when development is finished or by renting space out. In the case of Shinsegae, the retailer can pocket revenue from the development, rental and operations.

“While [Shinsegae] might have gained some hands-on knowledge of property management and operations by running Shinsegae Central City, selling or leasing residential and office spaces is a whole other case,” a property management insider said on the condition of anonymity.

“How they will manage to raise the massive funds needed for development is also key.”

BY CHOI HYUN-JU [[email protected]]