Seoul prime office net absorption hits 20,000sqm in Q4

The vacancy rate slightly declined to 3.1% during the quarter.

According to a Savills report, in Q4/2023, Seoul prime office net absorption declined in the Gangnam Business District (GBD) and Yeouido Business District (YBD), while increasing in CBD, for a citywide total of 20,000 sq m. The average vacancy rate was 3.1%, down 0.3 percentage points from the previous quarter. 

“Throughout 2023, vacancy rates in GBD, YBD, and CBD stayed below 5%, with total net absorption for the year reaching 17,300 sqm. Temporarily higher vacancy rates, caused by a timing mismatch between new office supply and tenant move-ins, were mitigated by robust office demand,” the report added.

Here’s more from Savills:

In the CBD, net absorption area was 32,900 sq m, with the vacancy rate of 2.4%, marking a 1.1ppts QoQ decrease. Samsung C&T (21,100 sq m) relocated from Jamsil Hyunggun Tower to seven floors in Samsung Main building, which had became vacant after the Bank of Korea’s move to its remodeled main office in Q3/2023

GBD saw negative net absorption of 11,000 sq m, contributing to an increase in the vacancy rate by 0.5ppts QoQ to 2.9%. The decrease in net absorption is attributable to Hyundai Marine & Fire Insurance (2,500 sq m) moving from KAIT Tower to Hanshin InterValley 24, and the law firms CLASS (800 sq m) merging with Hangyeol in the Kyobo Life Building at CBD. Considering Hyundai Motors Company's domestic business division occupying 100% of Scale Tower completed in Q1/2023, GBD is expected to have the lowest vacancy rate among major districts at 0.8%.

YBD's net absorption declined by 1,900 sq m, leading to a marginal increase of 0.1ppts QoQ in the vacancy rate to 4.7%. LG Energy Solution filled large vacancies in Parc 1 Tower 1, but financial and manufacturing companies vacated smaller spaces, with 50% downgrading to secondary buildings. 

In 2023, prime office demand by type were primarily as follows: Secondary to Prime 41%, Prime to Prime 22%, Expansion 21%, and New 16%. Over the past three years, Secondary to Prime has consistently represented the largest volume, indicating a market shifttowards Prime offices. Expansion demand rose from 13% to 17%, and further to 21%, with 65% attributed to increased corporate activity, particularly in the financial sector in the post-COVID era.