2019-10-23_DTZ戴德梁行_SEOUL_OFFICE-September_2019_MARKETBEAT_3页_383kb

Seoul Office Market Summary - Q3 2019

Core Content

This report provides an overview of the Seoul office market dynamics for Q3 2019, highlighting key trends in vacancy rates, rent growth, and new completions. It also outlines the expected market activity for Q4 2019 and beyond, considering the impact of the ongoing economic recession and limited supply.

Main Points

Economic Context

• The economy is in an overall recession due to global economic slowdown, trade disputes between the U.S. and China, and South Korea's removal from Japan's export whitelist.
• The private sector is not responding well to government fiscal spending efforts, which is affecting the office leasing market.

Vacancy Rates

• Overall: The average vacancy rate for Seoul Grade A office buildings is 8.1%, down 1.3 pp from the previous quarter.
• CBD (Central Business District): Vacancy rate dropped 1.3 pp to 12.4% due to the leasing of large spaces by Hyundai Construction and Engineering TF in Concordian building.
• GBD (Gangnam Business District): Vacancy rate fell 1.4 pp to 2.1%, driven by strong demand and limited supply.
• YBD (Yeouido Business District): Vacancy rate decreased 1.2 pp to 8.1%, reflecting strong demand from the finance sector and new asset management companies.
• Pangyo: Vacancy rate is effectively 0.0%, with high demand from IT companies.

Rent Growth

• Overall: Monthly average rent for Seoul Grade A office buildings increased by 1.3% YoY to KRW28,862/sq.m./month.
• CBD: Rent increased by 3.4% YoY to KRW17,798/sq.m./month.
• GBD: Rent increased by 1.3% YoY to KRW28,862/sq.m./month.
• YBD: Rent increased by 0.9% YoY to KRW23,677/sq.m./month.

New Completions

• YTD (Year to Date): 183,633 sqm of new office completions.
• Planned / Under Construction: 1,543,918 sqm of new Grade A supply is expected between 2019 and 2023.

Key Trends and Outlook

• CBD: Continued leasing activity, with the Concordian building lease driving the vacancy rate down. However, the office market is expected to be less active in Q4 due to no new Grade A supply and reduced relocation activity.
• GBD: High demand and low supply have led to a very tight vacancy rate of 2.1%, with expected sustained demand and limited supply in the near future.
• YBD: Strong demand from the finance sector and new asset management companies has led to a sharp decline in vacancy rates. Competitive marketing by landlords is expected to continue, further reducing vacancies in Q4.
• Pangyo: Ultra-low vacancy rate due to high IT sector demand, with no new supply expected in the short term, leading to continued rent growth.

Major Leasing Transactions in Q3 2019

• Concordian building (CBD): Hyundai Engineering & Construction TF leased 13,094 sqm.
• City Square (CBD): Yido Construction leased 3,561 sqm.
• Booyoung Taepyeong building (CBD): World Taekwondo leased 1,712 sqm.
• Gangnam N Tower (GBD): Samsung Securities leased 4,592 sqm.
• Luchen Tower (GBD): Hyundai Motor Company leased 6,685 sqm.
• Gangnam Finance Center (GBD): TEC leased 2,018 sqm.
• SK Securities Building (YBD): Alpha Asset Management leased 824 sqm.

Significant Projects Planned / Under Construction

• Donuimun 3 District (Gate Tower): 84,823 sqm, expected completion in 2020.2Q.
• Namdaemun Urban Renewal District: 125,367 sqm, expected completion in 2020.2Q.
• Park 1 (YBD): 393,305 sqm, expected completion in 2020.3Q.
• Korea Post (YBD): 68,431 sqm, expected completion in 2020.4Q.
• HJ Tower (GBD): 41,706 sqm, expected completion in 2020.4Q.

Conclusion

The Seoul office market is experiencing a decline in vacancy rates across major districts, driven by strong demand and limited supply. Rent growth is positive, with CBD showing the highest increase. The market is expected to remain stable in Q4 with limited new supply and reduced relocation activity. Significant projects are planned for 2020, which may impact the market in the coming year.