- Hodes Weill
Market Commentary: “K-Pop and now K-Office!
“K-Pop and now K-Office! The Seoul office market is marching to its own beat."
We’ve all heard of the phrase not all real estate is created equal. That’s certainly the case for the Seoul office market, at a time when dark clouds hang over many global office markets. At the end of Q4 last year, the Seoul office cap rate stood tall (or rather low) at 4.3%, a mere 90 basis points increase since its recent low recorded back in early 20221 - even more mind-blowing when considering Bank of Korea raised base rates ten times during the same period from 0.5% to 3.5%.
So, what’s behind this anomaly? Most notably, Seoul office fundamentals are strong. According to CBRE2, 61% of office survey participants plan to increase office space in the next three years. Conversely, new supply coming to market during the same period is only 50% of the annual absorption recorded in the past three years. Net absorption peaked in 2021 (yes, during COVID!) and stayed strong through 20221. Vacancy was at 2.7% as of Q4 last year3, the lowest since the pre-GFC heyday years. And finally, effective rent grew 10.8% in 2023, and 30% since the start of COVID3. Considering Seoul is home to 20% of the nation’s population and is already a saturated city with extreme land scarcity, these data points make for a pretty rosy office market picture.
Read the complete Market Commentary: “K-Pop and now K-Office!" below:
