Why Seoul’s office market is still performing better vs APAC neighbours

The city’s transaction volume declined at a slower rate compared to other markets.

According to a Savills report, annual office transaction volume in Seoul amounted to KRW9.3 trillion in 2023. 

While this is a 30% decrease from 2022’s KRW13.4 trillion, Seoul performed relatively well compared to other Asia-Pacific office markets, such as Tokyo (-46%), Singapore (-46%), and Shanghai (-61%). 

Here’s more from Savills:

Even among Asian peers, South Korea continues to maintain one of the highest office occupancy rates, despite the prevalence of remote work, and this trend is attributed to the robust leasing market. 

In 2023, strategic investors actively participated in transactions as equity investors due to the scarcity of office space. Due to zero-level vacancy, occupiers opted for direct investment in headquarter options rather than seeking for leasing alternatives in order to secure space. Notable examples include the gaming company Nexon investing in Autoway Tower (GBD), Hyundai Motor Company in Scale Tower (GBD), and National Credit Union Federation of Korea in Tower 8 (CBD). With the vacancy rate expected to remain at low levels in the short-term, the current trend is likely to continue in 2024. 

A few transactions in 2023 saw price correction, closing slightly lower than the initial bid prices. Concordian, Q2/2023, was traded at KRW34.5 million/py, down 7% from its initial bid. Similarly, Yongsan the Prime Tower, finalized in Q3/2023, sold at approximately KRW20.2 million/ py, reflecting a decrease in price of approximately 14% from an earlier-negotiated figure. Despite these price adjustments, the upward trend in rents contributed to an overall increase in gross cap rates, estimated to be in the mid-to-high 4% range by year-end.