Seoul prime office deals at 10-year low on rate uncertainty

Prime office transactions in Seoul hit a 10-year low in the second quarter due to delayed fundraising amid uncertainties of the central bank’s rate cut timeline, global real estate services provider Savills plc’s South Korean unit said on Tuesday.

The deal value of prime offices in the capital reached 630.3 billion won ($455.3 million) in the second quarter, according to a Savills Korea report on Tuesday. The quarterly transaction is the lowest since the third quarter of 2014 when it reached 484.4 billion won.

The data has been collected based on 110 prime offices, each with more than 30,000 square meters of floor area, in Seoul’s three major business districts – Gangnam, Central and Yeouido.

“Investors have delayed their decision-making process amid uncertainties of the timeline for Korea’s base rate,” said Hong Jieun, senior director at research and consultancy of Savills Korea. “As the office leasing market remains robust, price corrections are limited and a number of deals are expected to close in the second half of this year,” she added.  

The transactions of Seoul-based prime offices this year will be similar to last year, given several large deals underway such as Samsung Fire & Marine Insurance Co. headquarters The Asset, expected to exceed $724 million in property value, Koreit Tower,  D Tower Donuimun and Namsan Square, according to Savills Korea’s forecast.

The average rent for a prime office in Seoul is 36,242 won per square meter, with an average rent increase of 5.7%.

VACANCY RATES UP ON NEW SUPPLY

The vacancy rate of Seoul-based prime offices was 3.2% in the second quarter, down 0.7 percentage point from the previous quarter.

By area, Gangnam Business District (GBD) posted the lowest vacancy rate of 1.6% for the second quarter on high demand from tenants. The vacancy rate in the Central Business District (CBD), or downtown Seoul, inched up to 2.1% due to a new Meritz Financial Group office building.

In Yeouido Business District, the vacancy rate of prime offices dropped 3.2 percentage points to 7% as tenants began moving into new skyscraper Anchor1 and TP Tower, Teachers’ Pension's reconstructed headquarters.   

The vacancy rates in CBD and GBD are expected to rise in the third quarter as Korea Seven, the Korean operator of convenience store chain 7-Eleven, will move its headquarters office from downtown Seoul to an eastern district of the capital and e-commerce platform Interpark will move from Gangnam to Pangyo, Korea's so-called Silicon Valley.

Write to Jeong-Jin Eun at silver@hankyung.com

Jihyun Kim edited this article.