Yeouido Has Fewer Vacant Offices Than Gangnam... Vacancy Rate Is Even Lower

New Corporate Tenants Continue to Move into Yeouido's Anchor One and TP Tower
Seoul Office Vacancy Rate at 2.2%
Rent at 242,000 KRW per 3.3㎡

As vacancies in newly constructed large office buildings were filled, the Yeouido Business District (YBD) recorded a lower vacancy rate than the Gangnam Business District (GBD). This contrasts with other districts, where there were no noticeable supply-demand changes due to low vacancy rates and stagnant supply.

Planning_Yeouido Securities District, Park One, LG Twin Towers. Photo by Hyunmin Kim kimhyun81@

According to the '2023 Q3 Office Market Report' released on the 6th by Allsquare, a comprehensive commercial real estate service company led by CEO Lee Yong-gyun, the average vacancy rate in Seoul remained steady at 2.2% compared to the previous quarter. The average nominal rent without rent-free periods was 90,000 KRW per 3.3㎡ (1 pyeong), and the net operating cost (NOC), which is the rent per exclusive area, was 242,000 KRW per 3.3㎡, rising 0.9% and 1.0% respectively from the previous quarter. With no vacancies and rising rents, companies are observing the market situation, resulting in minimal changes in key indicators.

Yeouido, where large-scale supply poured in, was an exception. The office tower 'Anchor One' (17,765 pyeong) of 'Brighton Yeouido,' completed in Q3, secured tenants such as Yuanta Securities, LG Uplus, and Korea Securities Finance, achieving a leasing rate of over 60%. TP Tower (formerly the Teachers' Pension Hall) also shows a high pre-lease rate with multiple financial firms signing early lease agreements.

YBD Office Rent. (Provided by RSquare)

The average vacancy rate in YBD fell by 0.1 percentage points from the previous quarter to 1.4%, lower than GBD's 1.5%. It is expected to maintain a low vacancy rate going forward. The average nominal rent also rose to 89,000 KRW, marking a 12.1% increase compared to the same period last year, the largest increase among Seoul's major districts.

The office investment market in Seoul and Bundang continues to show sluggish performance. The transaction volume of offices in the Seoul-Bundang area was 2.59 trillion KRW, down 23.3% from the previous quarter and 33.9% from Q3 of the previous year.

The cumulative transaction volume from the beginning of this year to Q3 was 7.1 trillion KRW, only 58% of the same period last year. The total transaction volume for this year is estimated to remain around 10 trillion KRW, the lowest in the past five years. This reflects the full impact of interest rate hikes.

The average office price per 3.3㎡ in Seoul-Bundang for Q3 was 26.12 million KRW, about 89% of the peak level seen from late 2021 to early 2022 (approximately 29.42 million KRW). This represents a 0.76% decrease compared to the same period last year.

Jin Won-chang, Director of the Big Data Consulting Team at Allsquare, said, "Liquidity is shrinking, and with continued interest rate hikes, the burden on the commercial real estate investment market is increasing," but added, "Large offices accounted for about 66% of office transaction volume in Q3, indicating that investor preference for high-quality safe assets remains strong."

Allsquare's office market report is produced based on 954 office buildings in Seoul and Bundang with a total floor area of 1,000 pyeong (3,300㎡) or more. Buildings are classified as office buildings if more than 50% of the total floor area, excluding parking space, is used as office space; officetels are not included.