Seoul’s prime office transactions rise 6% in Q1 despite weak sentiment
Gyeong-Jin Min
11 HOURS AGO
Savills Korea's Q1 2025 Seoul Prime Office Report Despite mounting economic headwinds and heightened investor caution, the prime office market in Seoul posted a modest recovery in the first quarter, with transactions rising 6% from a year earlier to 2.7 trillion won ($1.9 billion), according to a Savills Korea report on Tuesday.
The figure marks a continuation of the upward trend, underscoring the resilience of core real estate assets amid volatile macroeconomic conditions, said the South Korean unit of global real estate services provider Savills plc.
The report covers prime offices, each with more than 30,000 square meters of floor area, in Seoul’s three major business districts – the Gangnam Business District (GBD), the Central Business District (CBD), or downtown Seoul, and the Yeouido Business District (YBD).
Among the standout deals in the first quarter was the 580.5 billion won acquisition of Namsan Square, a 72,252 square-meter office tower in Chungmu-ro, by HDC Asset Management Co.
The buyer is planning a major asset enhancement initiative involving remodeling and expansion of the property’s facilities to boost its long-term value.
Office buildings clustered near Gangnam Station (Courtesy of Seoul Metropolitan Government) Other notable trades include Crystal Square on Cheonggyecheon-ro, which changed hands for 206.8 billion won, and Gangnam Finance Plaza on Teheran-ro at 280 billion won.
VACANCY RATE
The vacancy rate of Seoul-based prime offices in the first quarter was 3.4%, down 0.1 percentage point from the previous quarter.
The slight decline, however, masked diverging trends across the city’s key submarkets.
The CBD and GBD saw an uptick in vacancies, while the YBD saw an improvement, posting a vacancy rate decline, helped by the lease-up of large vacant spaces at buildings such as Aengkeowon and One Sentinel.
The Asset, an office building in Seoul, is Samsung Fire & Marine Insurance's headquarters The YBD also led in rent growth, with average prime rents rising 5.7% in the first quarter from the year-earlier period, outpacing inflation and exceeding the CBD’s 3.6% gain and the GBD’s 3.7% rise.
The increase was attributed in part to newly renovated buildings commanding higher lease rates.
CAP RATE
Savills Korea estimated the capitalization rate, or cap rate, for Seoul’s prime office properties, on a net effective rent basis, to be in the low 4% range, suggesting that investor appetite remains robust for high-quality, income-generating assets.
The cap rate is a real estate valuation measure used to compare different real estate investments. Although there are many variations, the cap rate is generally calculated as the ratio between the annual rental income produced by a real estate asset to its current market value.
Seoul's Central Business District (CBD) Savills, however, cautioned that prime office vacancy rates in Seoul could trend higher throughout this year amid ongoing corporate relocations and subdued economic growth.
Landlords are expected to offer increased incentives, such as extended rent-free periods, to ease effective rental burdens and attract tenants, according to the report.
Hong Jieun, a research and consultancy executive at Savills Korea, said: “While the volume of office listings has risen sharply, transactions continue to be driven by strategic buyers and owner-occupiers. We anticipate growing liquidity on the back of blind-pool real estate funds set up by major domestic institutions such as the National Pension Service (NPS) and the Korea Post, which could spur activity in the core asset segment.”