Curious Announces 2023 Q3 Domestic Office Lease Market Report

Despite Global Economic Recession, Domestic Major Office Markets Maintain Low Vacancy Rates

Global real estate consulting firm Colliers (NASDAQ and TSX: CIGI) announced its Q3 2023 domestic office lease market report on the 16th.

According to the report, despite the global economic downturn, the domestic office market saw a rapid resolution of vacancies in newly supplied buildings in the Yeouido area, resulting in an average vacancy rate of 1.7%, down 0.4% from the previous quarter.

In the Yeouido area, tenants whose lease renewal period has arrived are increasingly considering relocating to newly supplied offices rather than renewing leases at increased rents. The competition for occupancy was fierce at Park One Tower 2 (NH Building), the tallest building in Yeouido. EY Hanyoung Law Firm signed a lease for the 44th and 45th floors of Park One Tower 2 (NH Building) and plans to relocate from Seoyeouido Taeyoung Building. The newly supplied Anchor One Building this quarter has secured leases with Yuanta Securities and Uplus, achieving over 60% pre-lease. TP Tower, scheduled for supply in Q1 next year, has about 90% pre-lease secured with Kiwoom Securities, Shinhan Investment Corp., and Timefolio Asset Management planning to relocate. Despite new supply, the Yeouido area recorded a vacancy rate of 2.4% due to active pre-leasing.

In the downtown area, large vacant spaces were resolved as BNK Financial Group decided to relocate to Booyoung Taepyeong Building and the Korea Artists Welfare Foundation to Seoul Square Building. As a result, the downtown area vacancy rate fell 1.1% from the previous quarter to 2%. While the vacancy rate for Grade A offices in the downtown area remains stable, the number of available office options is expected to increase compared to other areas. When GS Construction, currently leasing Grand Seoul Tower 1, relocates to Seocho JW Tower, the available lease area is expected to increase.

The Gangnam area vacancy rate decreased by 0.1% from the previous quarter to 0.8%. Despite the slowed expansion of tech companies, large available lease spaces are still not appearing in the market. As new office development sites in Gangnam become scarce, asset management companies are increasingly purchasing existing small to medium-sized buildings for redevelopment into new offices. Aegis Asset Management plans to develop an office with a total floor area of 8,183 pyeong (approximately 27,000 sqm) from basement level 5 to 17 floors above ground on the Baekam Building site near Gangnam Station by 2024. Maston Investment Management plans to supply Center Point Gangnam with 8,174 pyeong (approximately 27,000 sqm) near Gangnam Station in the second half of 2024. Although both buildings are smaller than the Grade A standard of 10,000 pyeong, they are expected to attract attention as new office supplies near Gangnam Station.

Jang Hyun-joo, Director of Colliers Korea Research Team, stated, “Concerns over WeWork’s business downsizing have raised worries about increasing vacancies in the global lease market. However, the impact of WeWork’s exit from the Korean office market is expected to be limited. Even if WeWork withdraws due to future downsizing decisions, the sites that WeWork had expanded in the Gangnam area will provide lease options in the previously supply-constrained Gangnam market, potentially creating opportunities for tech companies planning office relocations.”