The office vacancy rate in the central business district (CBD) of Seoul has increased, reaching its highest level in three years.
RealtyPlanet, a corporation specializing in commercial real estate proptech, released a report on the trends in the Seoul office sale and rental market for the first quarter on the 13th.
According to the report, the Seoul office market recorded relatively weak transaction volume in the first quarter. Both office building and office transaction volumes were lower than those of the previous quarter and the same quarter last year, particularly confirming a significant decrease in the transaction amount of office buildings during the same period.
The vacancy rate of Seoul office buildings rose for three consecutive months, increasing from 2.83% in January to 3.06% in February and 3.16% in March. The March vacancy rate (3.16%) is the highest level since March 2022, when it was 3.23%.
In particular, the CBD vacancy rate rose by 0.31 percentage points (p) from the previous month (3.04%) to 3.35%, driving the overall increase in the vacancy rate. In contrast, the Gangnam Business District (GBD) decreased from 3.40% to 3.34% by 0.06%p, while the Yeouido Business District (YBD) decreased from 2.41% to 2.34% by 0.07%p.
The total transaction volume of Seoul offices was 288, a decrease of 50.9% compared to the previous quarter (587). Meanwhile, the transaction amount increased from 468.7 billion won to 568.2 billion won, a 21.2% increase. Compared to the first quarter of the previous year, the transaction volume (291) and transaction amount (636.4 billion won) decreased by 1.0% and 10.7%, respectively.
The transaction volume of office buildings was 13, with a transaction amount of 1.221 trillion won, representing decreases of 67.5% and 60.2%, respectively, compared to the previous quarter (40 transactions, 3.577 trillion won). Compared to the same quarter last year, the transaction volume decreased by 50.0% from 26 transactions and the transaction amount decreased by 36.4% from 1.9138 trillion won.
By transaction entity, out of the 13 office building transactions, 10 (76.9%) were purchased by corporations, with sellers identified as corporations and individuals for 7 transactions (53.8%) and 3 transactions (23.1%), respectively. Additionally, there were 2 transactions (15.4%) between individuals, and 1 transaction (7.7%) between a corporation and an individual (seller-buyer order). In terms of transaction amounts, transactions between corporations accounted for 90% with 1.0967 trillion won, transactions between individuals and corporations totaled 91.5 billion won (7.5%), transactions between corporations and individuals amounted to 17.7 billion won (1.5%), and transactions between individuals totaled 12.2 billion won (1.0%).
In the office market, out of the total 288 transactions, 146 (50.7%) were purchased by individuals. Among these, 124 (43.1%) were transactions between individuals, and 22 (7.6%) were between corporations and individuals. Transactions between individuals and corporations accounted for 85 (29.5%), transactions between corporations totaled 54 (18.8%), transactions between individuals and other types amounted to 2 (0.7%), and transactions between other types and corporations comprised 1 (0.3%).
In March, the cost per exclusive area of office buildings in Seoul (NOC) was 199,854 won, continuing a slight increasing trend from January's 199,492 won and February's 199,628 won. By major region, the CBD (199,620 won) showed the largest increase of 266 won compared to the previous month, while the GBD (209,371 won) increased by 263 won, and the YBD (189,525 won) increased by 18 won.
Jung Su-min, the head of RealtyPlanet, noted, "The first quarter of the Seoul office market experienced overall subdued transactions, with the increase in vacancy rates in the CBD area leading to the highest overall vacancy rate in three years. I expect that political uncertainty due to the impeachment situation will be resolved in the first half of 2024, and as a trend of interest rate cuts begins, investment sentiment will gradually recover. It is anticipated that the rental market will remain stable amid limited new office supply in the three major regions, while rental prices will continue to rise slightly."