How kkondae culture is keeping Seoul's offices filled to the brim

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How kkondae culture is keeping Seoul's offices filled to the brim

Published: 05 Dec. 2023, 17:22 Updated: 05 Dec. 2023, 17:56

SEO JI-EUN
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Buildings in Samseong-dong in central Seoul. Seoul's office vacancy rate stood at 2.2 percent as of the third quarter, relatively lower compared to escalating figures in other countries. [YONHAP]

In the face of escalating office vacancies in the United States and Europe, Seoul's office landscape stands resilient with a notably low vacancy rate — credited to its kkondae-style work culture with an emphasis on in-person interactions and the departure from remote work post-pandemic.

Seoul's office vacancy rate stood at 2.2 percent as of the third quarter of this year, according to the latest findings from global real estate services firm Cushman & Wakefield. The figure, based on a comprehensive survey covering 166 office buildings with a total floor area of 33,057 square meters (355,820 square feet) or larger across Seoul's major districts and Pangyo in Gyeonggi, is even lower than the "natural vacancy rate" seen in global office markets — 5 percent — translating to a largely vacancy-free Seoul. Natural vacancy rate refers to the normal level for vacant space.

Vacancy rates across global office markets [CUSHMAN & WAKEFIELD]

This stark contrast is emphasized when compared to the office vacancy rates abroad. The United States, boasting the largest office market, had a 19.4 percent vacancy rate in the third quarter, followed by Hong Kong at 17.7 percent, China 17 percent, Japan 5.1 percent and Singapore 3.9 percent.

Cushman & Wakefield pointed out four factors contributing to Seoul's remarkably low office vacancy rate: the reduction or discontinuation of remote work, a shortage of new office supply compared to demand, a pre-existing demand for office upgrades and a robust domestic economic growth rate.

An employee works from home. [SK TELECOM]

The shift from remote to on-site work following the peak of the Covid-19 pandemic played a significant role in the decrease in office vacancy rates. Companies like Kakao and SK Telecom transitioned from full-time remote work to a weekly schedule, and others, including game companies like Nexon, Netmarble and NCSoft, eliminated remote work.

"Korea's average number of remote work days per week is the lowest globally, contributing to the robust demand for office space," said Jung Jin-woo, head of research at Cushman & Wakefield Korea, during a press conference in Seoul on Tuesday. "The relatively lower per capita residential occupancy area in Asian countries, including Korea, compared to Anglo-Saxon countries, has also created a comparatively inferior remote work environment."

Highlighting the shortage of new office supply relative to demand, Seoul's annual new office supply, which averaged around 290,600 square meters until last year, is projected to be halved in 2026.

Jung cited the "prolonged Russia-Ukraine war and soaring commodity prices, driven by an aging workforce and a shortage of new entrants" as contributing factors to the rise of construction fees and the slower pace of construction completion.

The ongoing demand for companies to relocate to new or upgraded office spaces to enhance employee productivity has also played a pivotal role in lowering vacancy rates.

Cushman & Wakefield notes that the per capita office occupancy area increased from 13.2 square meters in 2010 to 14.5 square meters in 2020, with the proportion of office shared space, including employee break areas, rising from 16 percent to 23 percent during the same period.

Jung Jin-woo, head of research at Cushman & Wakefield, speaks during a press conference held at Cushman & Wakefield's Seoul headquarters in central Seoul on Tuesday. [SEO JI-EUN]

The global real estate firm anticipated that Seoul's robust office leasing ownership would persist into the next year.

"With recent increases in construction costs and safety-related regulatory enhancements, coupled with a limited supply of new offices, the Seoul office market is poised to remain robust, driven by the continuous growth of companies seeking quality office spaces," noted Jung.

BY SEO JI-EUN [[email protected]]