[Asia Economy Reporter Ryu Taemin] The average vacancy rate of office buildings in Seoul has dropped to 2.2%, marking the lowest level in 13 years. In particular, vacancies have significantly decreased in the downtown area, which previously had relatively high vacancy rates. With strong demand from companies and a continued supply shortage, the vacancy rate has declined for six consecutive quarters, intensifying competition among tenants.
According to the office market report published by Cushman & Wakefield on the 16th, the average vacancy rate of Grade A office buildings in Seoul in the third quarter of this year was 2.2%, down 0.8 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 six consecutive quarters since the first quarter of last year.
By major area in Seoul, the Yeouido Business District (YBD) vacancy rate remained steady at 1.5% compared to the previous quarter. After most vacancies in Park One Tower 1 and Tower 2 (NH Financial Tower), which reached two years since completion, were resolved, YBD is showing an unprecedentedly low vacancy rate. This quarter, Korea Growth Investment Corporation signed leases for two floors in the SK Securities Building, and Korea Post Securities completed its move into the Hi Investment & Securities Building (formerly KTB Building).
The vacancy rate in the Central Business District (CBD) fell 1.9 percentage points from the previous quarter to 3.3%. Large vacancies were quickly resolved as Kakao Entertainment signed a lease at Centropolis, where vacancies had occurred due to the departure of an e-commerce company. TDCX Korea signed a contract for Gwanghwamun D Tower, SK Hynix completed a lease at Center One EAST, and Artworks Korea, a subsidiary of CJ ENM, is preparing to move into KDB Life Tower, showing active leasing activity in the CBD. With large spaces becoming difficult to find even in the CBD, the Myeongdong SK Networks Building (GFA 13,749 sqm) is scheduled to be newly supplied after remodeling in the fourth quarter.
The average vacancy rate in the Gangnam Business District (GBD) rose slightly by 0.1 percentage points from the previous quarter to 1.2%, still maintaining a vacancy rate in the 1% range. Although the departure of a social commerce company from the same tower caused a slight increase in vacancy, Cushman expects the impact to be temporary due to abundant standby demand. Airsm Medical and F&F signed contracts at Geungilta Tower, and LIG completed a lease at Lotte World Tower. Gameberry has completed its relocation to Majesta City Tower 2, and Jeongyukgak is preparing to move into Doosan Building in Nonhyeon-dong, while Genie Music is preparing to move into Hanseok Tower. New office supply near Gangnam Station is scheduled for the first half of next year, but it is expected to be pre-leased before completion, so the impact on the market is expected to be limited.
Meanwhile, the office rent increase rate in the third quarter was 2.1%, down 0.1 percentage points from the previous quarter. Due to recent high inflation and ongoing interest rate hikes, rent and maintenance fee increases are expected to accelerate. Additionally, the continued supply shortage relative to corporate office demand is also considered to have influenced this trend.
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