"No Vacancies"... Seoul Office Vacancy Rate Hits 13-Year Low in Q2

Building panorama around Seoul (Photo by Asia Economy DB)

[Asia Economy Reporter Ryu Taemin] The average vacancy rate of office buildings in Seoul has dropped to 3.0%, marking the lowest level in 13 years. In particular, vacancies have significantly decreased in Yeouido and the downtown area, where vacancies were relatively high. With strong demand from companies and a continued shortage of supply, the vacancy rate has declined for five consecutive quarters, intensifying competition among tenants.

According to the office market report published by Cushman & Wakefield on the 24th, the average vacancy rate of Grade A office buildings in Seoul in the second quarter of this year was 3.0%, down 0.5 percentage points from the previous quarter. This is the lowest figure in 13 years since the first quarter of 2009. The report also shows that the average vacancy rate of Grade A office buildings has decreased for five consecutive quarters since the first quarter of last year.

By major area in Seoul, the vacancy rate in the Yeouido Business District (YBD) fell the most among the districts, dropping 1.6 percentage points from the previous quarter to 1.5%. In the second quarter, vacancies were resolved mainly in Park One Tower 1 and Tower 2 (NH Financial Tower), and KT Yeouido Tower, which had large vacant spaces, leading to the decline in vacancy rates in Yeouido. With the completion of Park One, the YBD area, which once recorded a vacancy rate exceeding 20%, showed a vacancy rate in the 1% range for the first time in two years.

The vacancy rate in the Central Business District (CBD) fell 1.2 percentage points from the previous quarter to 5.2%. CJ Logistics signed a lease contract for Tower 8, immediately filling the vacancy left by KB Kookmin Bank’s call center. Additionally, KT IS signed a contract at K-Square City, Samsung Life Insurance completed a contract at Grand Seoul Tower 2, and BAT Rothmans completed its relocation from the Gangnam area to Center One WEST, indicating active leasing activities in the CBD area.

The average vacancy rate in the Gangnam Business District (GBD) rose 0.7 percentage points from the previous quarter to 1.1%, maintaining a vacancy rate in the 1% range. Cushman explained that this temporary increase in vacancy rate includes many vacancies scheduled for lease agreements. Some companies located in the existing GBD area moved to other districts after their contracts ended, causing some vacancies, but the vacancy rate in the GBD area, which has many potential tenants, is expected to decrease in the third quarter.

Meanwhile, the office rent increase rate in the second quarter was 2.2%, marking the highest rise in 10 years. Due to recent high inflation and ongoing interest rate hikes, rent and management fee increases are expected to accelerate. The continued shortage of supply relative to office demand from companies is also considered to have influenced this trend.