Seoul office rent sees record surge in 2023

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Seoul office rent sees record surge in 2023

Published: 19 Feb. 2024, 18:20 Updated: 19 Feb. 2024, 19:38

SEO JI-EUN
seo.jieun1@joongang.co.kr

Office buildings in Yeouido, western Seoul [SANGGA LAB]

Office rent in Seoul surged by 8.8 percent on year in 2023 — an all-time high for the growth rate, according to a real estate report released Monday.

Nominal rents refer to contractual rental rates, excluding rent-free periods.

[CBRE KOREA]

Average office effective rents, which encompass all economic considerations paid by tenants to landlords, grew by 15.1 percent, according to CBRE, a global commercial real estate company.

The surge was particularly notable in areas like Yeouido, western Seoul, where previously nonexistent vacancies led to reduced rent-free periods across major business districts. Meanwhile, landlords' aggressive increases in nominal rents continued as the scope of additional incentives gradually decreased.

The vacancy rate fell 0.2 percent from the previous quarter, settling at 1.5 percent. Notably, the Gangnam business district boasted the lowest vacancy rate of 0.7 percent, followed by the central business district at 1.1 percent and the business district of Yeouido at 3.6 percent.

[CBRE KOREA]

In the fourth quarter of 2023, 61 percent of leasing transactions were concentrated in the central business district. Key transactions included the relocation of Samsung C&T Corp. and lease agreements involving SM Core and Korea Polyacetal.

Similar leasing activities were observed in the Gangnam business district, with notable relocations to GT Tower and lease agreements at the Parnas Media Tower. In the business district of Yeouido, companies such as domestic software developer t’order and law firm Daeryun contributed to ongoing leasing activity.

Despite the upward trend in office rents, the total transaction volume of Seoul's commercial real estate market experienced a 20 percent decline from the previous year, amounting to 14.8 trillion won ($11.1 billion). Transaction volumes, meanwhile, decreased across all sectors excluding logistics.

“The commercial real estate market in 2023 was somewhat contracted due to ongoing liquidity constraints from high interest rates and the continued gap in expected prices between sellers and buyers,” said Claire Choi, director of CBRE Korea. “However, with expectations for lower interest rates in 2024, we expect positive changes to begin, including robust market demand in the domestic office market, the gradually recovering retail market and the stabilizing logistics market.”

In the fourth quarter of 2023, the Seoul commercial real estate investment market recorded transactions worth 3.4 trillion won, with office assets comprising 62 percent of that total. The logistics market witnessed transactions of around 858.2 billion won, while retail transactions slightly decreased from the previous quarter to 422 billion won.

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]