[CONTRIBUTION] Seongsu’s success comes at a cost for startups – The Korea Times

As rents soar, Seongsu commercial district is losing its startup spirit

People wait in line to enter the Pokemon pop-up store at Olive Young N Seongsu in Seongdong District, Seoul, May 2. Yonhap

One of the defining features of Seoul’s Seongsu-dong is its abundance of pop-up stores — retail spaces that operate only for a limited time.

Because the neighborhood attracts young consumers and international tourists, companies frequently open pop-up stores there to promote new products and services.

Choi Youn-jin

Unlike traditional retail shops, which focus primarily on sales, pop-up stores are designed to create memorable experiences. Eye-catching displays encourage visitors to stop by, take photos and share them on social media, generating buzz for brands, products and companies. As a result, everything from K-pop merchandise and food to fashion, electronics and even long-established digestive drinks familiar to older generations have found their way into Seongsu’s pop-up scene.

For startups in particular, pop-up stores have been an effective marketing tool. Without the financial resources to open permanent stores or launch large-scale advertising campaigns, many young companies have relied on temporary spaces to introduce themselves to consumers. Their creative pop-ups have also helped shape Seongsu’s distinctive identity.

That atmosphere, however, is beginning to change.

Capital has poured into Seongsu, turning the neighborhood into a place where startups can no longer easily afford to operate.

The founder of a startup I recently met said he abandoned plans to open a pop-up store in Seongsu after learning that a 132-square-meter space would cost 30 million won ($22,000) per day to rent. Running a pop-up for just three days would require nearly 100 million won.

As a result, many landlords now prefer renting vacant spaces for short-term pop-up stores rather than signing long-term leases with tenants.

Some call this phenomenon the “Seongsu premium.”

Like other highly sought-after commercial districts, Seongsu has seen not only rents but also key deposit — the lump-sum payment often required to secure a commercial lease in Korea — soar to levels comparable to Seoul’s Gangnam District.

A Korean branch manager for a foreign startup that manufactures digital devices recently told me he had hoped to open a flagship store in Seongsu. Instead, he was shocked to discover that the area had become the second-most expensive commercial district after Myeong-dong.

For a commercial space of about 132 square meters, monthly rent in Myeong-dong was around 100 million won, while comparable properties in Seongsu cost about 50 million won per month — similar to, or even higher than, rents in some parts of Gangnam.

On top of that comes the key deposit. For commercial spaces pf the same size in Seongsu, the required payment ranges from 1 billion won to 3 billion won.

Some countries, including Britain and France, have systems resembling the concept of key deposit. Many others do not. In parts of the United States, excessive demands for such payments are prohibited.

Executives at the startup’s overseas headquarters reportedly reacted with disbelief, asking why anyone would demand such a large, nonrefundable payment without any clear justification. To them, it sounded more like a scam than a business practice.

For years, Seongsu served as a home for startups.

As young companies gathered there, they fostered a vibrant street culture and helped create the neighborhood’s unique character. Today, however, Seongsu has become a place many startups can no longer afford.

It is disappointing — and more than a little bittersweet — to see a form of gentrification that once displaced residents and small businesses now beginning to push out the very startups that helped make Seongsu one of Seoul’s most dynamic neighborhoods.

The writer heads the Startuplab section of the Hankook Ilbo, where he covers the IT and startup sectors. This column from the Hankook Ilbo, the sister publication of The Korea Times, is translated by a generative AI system and edited by The Korea Times.