Muristek
The grade-A office transactions in Seoul in 2021 hit a record high of 17.1 trillion won ($14.2 billion), renewing the 16.6 trillion won in 2020. The net absorption area, or physically occupied area minus the physically vacant area, reached the highest-ever 55,345 square meters last year, said Jones Lang LaSalle Inc. in its report Korea Property Digest on Feb. 3. Transactions of quality offices in Seoul were active thanks to the low-interest rate and ample liquidity. The sales price per unit area in the central business district (CBD) and downtown Gangnam broke previous records, the report stated.The mega-deals in 2021 include South Korean conglomerate Lotte Property & Development Co.’s acquisition of a 25% stake in Lotte World Tower, the world’s fifth tallest building, from Lotte Shopping Co. and Hotel Lotte Co. Also, SK Group bought SK Seorin Building, the conglomerate’s headquarters office, from Hana Alternative Assets Management Co. for more than 1 trillion won. Koramco Asset Management Co., a leading asset manager of Korea, sold CBD-based Pine Avenue Tower B to Samsung SRA Asset Management Co. for 617.4 billion won.This year, a huge office deal has been already closed. In early January, ARA Asset Management Korea completed selling Alpharium Tower, based in so-called Korea’s Silicon Valley Pangyo, to Mastern asset Management Co. for around 1 trillion won.Brookfield Asset Management-owned International Finance Center (IFC), based in Seoul’s financial district Yeouido, is currently on the market, of which sale is expected to reach 4 trillion won. Korea’s game developer Krafton Inc. is slated to buy headquarters and offices of Korea’s largest supermarket chain E-mart Inc. for more than 1 trillion won within the first quarter. Yuanta Securities Korea’s headquarters and Seoul City Tower, both in CBD, are on the market as well.LOW SUPPLY IN 2022 TO REDUCE VACANCY RATEIn the fourth quarter of 2021, Seoul-based offices’ vacancy rate slid to 8%, nearly half of that in 2020. Vacancy rates in Gangnam, Yeouido and CBD in the fourth quarter respectively dropped 422 basis points (bps), 318 bps and 128 bps from the third quarter. Particularly, the vacancy rate of Gangnam-based office hit 1.5%, the lowest-ever in the past decade.The rent of Seoul-based offices soared backed by growing demand. In the fourth quarter, the average monthly rent for grade-A office amounted to 30,424 won per square meter, the highest ever. Some price adjustments and low vacancy rates backed the monthly rent increase, the report said.Rents for grade-A offices in Seoul are expected to rise in the future, said Veronica Shim, head of research at JLL Korea. As the vacancy rate will continue to stabilize, a rise in nominal rent and shorter rent-free periods are expected, she added.The new office supplies in Seoul will be only 49,600 square meters this year. Korean real estate investment firm IGIS Asset Management Co. is undertaking a 49,587 square-meter office development on the site of the former Hyundai Motor Company's Gangnam Central Branch.The report expected the vacancy rate will be even lower as there is not much office supply for lease this year.Despite the bullish market sentiment, the office transactions in Seoul could slow down due to low supply and interest rate hike, said Chang Chae-Hun, the country head of JLL Korea.By Jihyun Kimsnowy@hankyung.com