Seoul office rents rise by 7.1% in Q2

Rent grew for all submarkets.

According to a JLL report, in Q2 2024, net effective rent in Seoul’s office market was around KRW 138,824 per pyeong per month, up 1.2% q-o-q and 7.1% y-o-y. The rent-free period remained slightly below one month. 

Rent increases were observed in all submarkets.

Here’s more from JLL:

Office investment volume plunged to KRW 1.9 trillion in Q2 2024. Notable transactions in the quarter were concluded in Gangnam, such as Capstone Asset Management’s purchase of ICON Yeoksam and Hyunjin Group’s acquisition of WeWork Tower.

The scarcity of vacant spaces decreases high-profile leases

Seoul recorded a net absorption of 21,807 pyeong, with a notable contribution from Yeouido, particularly TP Tower, which was recently completed. The leasing activity stayed comparably muted in the CBD and Gangnam.

Due to the limited availability of large office spaces in Seoul, the proportion of high-profile leases has compressed. Some tenants who use large spaces are opting to renew their leases instead of seeking new spaces.

A new Grade B office building was supplied in the quarter

Chungmuro Office was completed in the CBD. It has added approximately 6,032 pyeong of space to the market, all of which is currently vacant.

Seoul’s overall vacancy rate was recorded at 2.5%, down by 112 bps q-o-q. The CBD and Yeouido’s occupancy improved, whereas Gangnam’s vacancy stayed virtually flat.

Outlook: Deal closings uncertain in challenging financing markets

As deals often take longer to finalise, sellers are considering offloading their assets well before loan maturity dates. Due to financing difficulties, many deals are pending or encountering issues.

Although there are numerous office buildings listed on the market, only a few have achieved their expected prices. The large gap between buyer and seller price expectations added challenges to deal closings.

Note: Financial indicators are for the CBD, while physical indicators are for the Grade A office market. Data is on a GFA basis.