Seoul prime office demand reaches nearly 60,000sqm in Q1

Three major districts recorded record absorption levels since Q4 2022.

According to a Savills report, Seoul prime office net absorption reached 59,300 sqm in Q1/2024, with the vacancy rate rising by 0.7ppt to 3.8% from the previous quarter. CBD and GBD vacancy rates stabilized below 2% again, and while YBD's vacancy rate showed a notable increase due to the completion of TP Tower, it is expected to have decreased from the previous quarter with pre-leased tenant occupancy. 

“Lease demand surged in Q1/2024, driven by the financial, IT, and service industries, marking the highest net absorption in the three major districts since Q4/2022,” the report said.

Here’s more from Savills:

The new demand by category was consistent across all three districts,with New Organizations comprising the highest proportion at 35%. Conversely,the upgrade demand from Secondary to Prime office space dropped by 5% from the previous quarter to 25%, continuing a steady decline since reaching 56% in Q2/2023. This decline is attributed to fewer tenants being able to afford higher rents amid continuous rent hikes. 

CBD experienced net absorption of 24,600 sqm, a decrease from the previous quarter,with a vacancy rate of 1.6%, down by 0.8ppt. Shinhan Bank's relocation to the Samsung Main Building, after remodeling, filled a vacancy of 22,700 sqm. LotteCard'sCRM Center moved into 4,800 sqm at Taepyeong-ro Building,while theKoreaArtists' Welfare Foundation and the Korea Institute of Culture and Arts for the Disabled occupied 2,900 sqm and 1,600 sqm,respectively, at Seoul Square. The financial industry played a significant role in driving new lease demand in CBD, alongside contributions from government institutions, services, and real estate sectors. 

GBD’s net absorption was 20,100sq m,which turned positive in the second quarter after recording negative net absorption area in the third quarter of 2023, and the vacancy rate was 1.6%, down 1.3%p. Nota, Ace Equity Partners, zespri and AliExpress moved into Parnas Tower to solve the vacancy of 3,600sqm. Logistics company POSCO FLOW and AI model developer Riiid moved into 5,000sqm at Samsung Life Daechi Tower. Despite limited vacancy, GBD witnessed the largest drop in vacancy among the major districts as a result of positive lease demand from technology and logistics sectors. 

In YBD, quarterly net absorption totaled 14,500sqm, which as similarly to GBD, had turned positive after two quarters of decline, since recording a negative figure in Q3/2023, but the vacancy rate rose 5.5%p to 10.2% on the effects of new supply. However, assuming move-in is completed at the pre-leased areas of Anchor One Bldg. and TP Tower, YBD’s vacancy rate is estimated to be around 3.1%, down from the figure witnessed in the previous quarter. 

Occupiers in finance such as Yuanta Securities and Korea Securities Finance and LG Uplus took up 12,600 sq m at Anchor One Bldg. As opposed to the previous quarter when tenants in the manufacturing industry outperformed occupiers in the financial industry, lease demand in the YBD originated largely from the financial and professional service sectors, and relocations within the region was notably high at 46%.