Rents in Incheon Airport Duty Free Shops to Exceed 130 Million Won per 3.3 Square Meters

As Incheon International Airport Corporation (IIAC) has officially opened tendering procedures for duty-free concessions, it has proposed a new minimum lease rate that is 15 percent higher than the current lease rate. Sales at duty free stores in Incheon Airport are the highest in the world.

In a briefing on the bid which was held recently, many interested parties showed up, heralding fierce competition on a global scale. Among them were major domestic retailers such as Lotte, Shinsegae, Hotel Shilla, and Hanhwa. The world’s largest duty-free retailers such as DGS and Dufry also attended.

According to the “Request for Proposal of the 3rd Duty Free Business Licenses”’ from IIAC, which was released on Dec. 15, the minimum tender price covering some 17,394 m² of retail space (12 areas) in the airport is 708.63585 billion won (US$642.02418 million). The amount breaks down to 134.44 million won (US$121,809) per pyeong (roughly 3.3m²).

The minimum tender price is a sort of lowest bid limit guideline for bidders. In reality, bidders need to offer a higher bid than the lowest limit to have a reasonable chance of winning the spot.

This new minimum limit is 15 percent higher than the current annual rent (615 billion won or US$557 million as of 2013) of operators holding the licenses at the airport including Lotte, Shilla, and the Korean Tourism Organization.

An official from one of the current duty free shop operators in Incheon Airport said, “We are practically at a loss due to the high rents even now. As the lowest lease fee has increased by the current 15 percent, circumstances got even worse in terms of profitability.”

In addition, since the competition among domestic and foreign retailers in this third bidding is more fierce than ever, the actual lease fee, to be determined by bid, will surpass the proposed minimum lease fee from IIAC.