Seoul’s Thriving Office Market Boasts Over 98% Occupancy Amidst Dwindling Demand Elsewhere

• 28 November 2023
• International News
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In a world where office spaces face a downturn, Seoul’s office market stands as a beacon of success, boasting an impressive occupancy rate of over 98% for grade-A offices, coupled with a remarkable 15% surge in rents compared to the previous year.  This is according to a Bloomberg study published on 15 November 2023.

The frenzy for office space is vividly demonstrated by competitive tenders, such as the recent spectacle at Parnas Tower in the prestigious Gangnam district, where a dozen companies, both domestic and international, vied for an available floor.

According to Y J Choi, Head of Leasing at Cushman & Wakefield Korea, the market dynamics are unprecedented, with tenants, particularly those in need of substantial spaces, willingly accepting price hikes of 30% to 40% due to the scarcity of alternatives. Such conditions contrast sharply with the United States, where office spaces witness reduced occupancy and impending price crashes.

This extraordinary scenario in Seoul can be attributed to a unique blend of factors, including supply-demand dynamics, cultural preferences, and economic resilience. With a mere 1.7% vacancy rate in Q3, Seoul outshines the Asian average of 19%, as reported by CBRE Group. CBRE’s Head of Research for Korea, Claire Choi, notes that the shortage of office spaces in Seoul, prevalent since 2021, is expected to persist until 2025, driving rents to grow by approximately 15% in 2023.

In contrast, the United States is witnessing a stark downturn, with tenants downsizing their office spaces or opting for remote work. Property owners, already grappling with shrinking demand, now face additional challenges as higher interest rates squeeze profit margins, pushing U.S. office prices toward an imminent crash.

A recent survey conducted by Bloomberg forecasts at least another nine months of declines for the U.S. commercial real estate market. The juxtaposition between Seoul’s thriving office market and the challenges faced by U.S. landlords underscores the unique dynamics shaping the global real estate landscape.

Restrictions on redevelopment imposed by the government and pandemic-induced disruptions have contributed to the supply shortage. Meanwhile, steady demand is sustained by South Korea’s robust domestic economy, which has exhibited growth throughout the pandemic, driven by strong overseas markets for its products, including microchips and cars.

Calvin Chou, Co-Chief Investment Officer and Head of Invesco Real Estate in Asia-Pacific, acknowledges Seoul as the “strongest performing office market in the world for the last two years.”

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