MARKETBEAT

OFFICE SNAPSHOT
SEOUL, SOUTH KOREA

Q3 2014

A Cushman & Wakefield Research Publication

Korea's economic growth remains weak despite

a steady rebound from the impact of the Sewol
disaster that dampened private-sector
consumption. While exports have shown a
favorable pattern, Korea's economic growth is
lower than forecast. According to the Bank of Korea, the Korean
economy is projected to expand by 3.8% in 2014. The bank dropped
the rate from 2.5% to 2.25%, the first cut since August 2013.

OFFICE MARKET OVERVIEW

No prime office buildings were completed in the third quarter of
2014. In Jamsil, Samsung SDSs new office building (Jamsil Hyanggun
Tower B) was completed in the second quarter of 2014. However,
the building is not included in our prime office building analysis in
third quarter 2014, as the building on the fringe of the GBD is leased
out to Samsung SDS on a long-term basis. Samsung SDSs new office
building, Hyanggun Tower A, was completed in 2013, but the
company completed relocation to the building in the third quarter of
2014 after the completion of Hyanggun Tower B. Companies like
Samsung SDS relocating its headquarters outside the major
submarket led to a decline in prime office demand in Seoul.
The CBD recorded a net absorption of -6,509 square meters (sq.m.)
and demand for prime office declined as most major buildings
resolved their vacancy in the previous quarter. The vacancy rate rose
by 0.3 percentage point from the previous quarter to 9.1%. Samsung
SDS left its existing prime office buildings such as Samsung Group HQ
and Samsung Taepyungro Building to consolidate its offices in
Hyanggun Tower (Samsung SDS Tower). Meanwhile, the Rush&Cash
company relocated its headquarter from the GBD area to the KCCI
Building in the CBD area.
Vacancy rate of the GBD was further affected as Samsung SDS
relocated its headquarters to its own building in Jamsil, near Seoul's
Gangnam. The GBD also posted a decrease in demand and net
absorption of -4,704 sq.m. Golden Tower and Assem Tower saw its
vacancy rise because of the relocation of Samsung SDS. Samsung Life
Insurance, which previously leased offices in the Capital Tower in the
GBD area, also moved to its new office building in Jamsil.
In the YBD area, a leasing demand decline in the bank, insurance and
security sectors was witnessed in this quarter as a result of
integration among the finance companies.

Cushman & Wakefield (Korea) Ltd.

6F Seoul Finance Center, 136, Sejong-daero

Jung-gu Seoul, 100-768, Korea
www.cushmanwakefield.com/knowledge

For more information, contact:

Judy Jang, Senior Manager
+82 2 318 8322
judy.jang@ap.cushwake.com

Yuhwa Securities Building also saw its vacancy rate increased due to
the departure of Kiwoom Securities and downsizing of Yuhwa
Securities. The headquarters of Kiwoom Securities will move to the
Kiwoom Finance Square in the YBD. However, absorption of the
YBD was positive due to the take-up of Two IFC and HP buildings.

OUTLOOK
Looking forward, the average office vacancy rate in Seoul will increase
due to the additional office building supply planned for 2014. The GL
Tower (Chungjin 8 district), the Ollech-Plex (headquarter of KT) and
D Tower are expected to be completed in the fourth quarter of
2014. Marketing for newly supplied buildings near the Ulgiro station
will be aggressive to reach desired occupancy levels. Thus, landlords
should continue to provide incentives like rent-free periods to attract
tenants. However, the supply spigot would be turned off across all
major districts in 2015. The current tenant-favored market will
continue for a short period of time in the office market, but will shift
to be landlord-favorable. As such, although further new supply is
expected in the second half of 2014, incentives will be tightened along
with the reduced office supply.
STATS ON THE GO

Overall Vacancy
Direct Asking Rents
(KRW/sq.m./mo)

Q3 2013

Q3 2014

Y-O-Y
CHANGE

13.8%

12%

-1.8pp

29,658

26,460

-10.8%

12 MONTH
FORECAST

DIRECT RENTAL VS. VACANCY RATES

krw/sqm/mth

ECONOMIC OVERVIEW

30,000

14.0%

25,000

12.0%
10.0%

20,000

8.0%

15,000

6.0%

10,000

4.0%

5,000

2.0%

0.0%
2009

2010

2011

DIRECT GROSS RENTAL RATE

2012

2013

Q3 2014

DIRECT VACANCY RATE

The market terms and definitions in this report are based on NAIOP standards. No warranty or
representation, express or implied, is made to the accuracy or completeness of the information
contained herein, and same is submitted subject to errors, omissions, change of price, rental or other
conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.
2014 Cushman & Wakefield, Inc. All rights reserved.

SEOUL, SOUTH KOREA

SUBMARKET

INVENTORY

OVERALL

(SQ.M.)

VACANCY
RATE

UNDER
CONSTRUCTION

OVERALL
NET ABSORPTION

(SQ.M.)

YTD
CONSTRUCTION
COMPLETIONS

(SQ.M.)

GRADE A
AVERAGE
RENTAL RATE

GRADE A
AVERAGE
RENTAL RATE

(KRW/SQ.M./MONTH)

(USD/SF/YR)

CBD

2,493,449

9.1%

422,665

157,538

-6,509

30,907

$32.94

GBD (Gangnam)

1,879,767

9.1%

47,308

-4,704

26,838

$28.60

YBD (Yeouido)

1,397,657

21.0%

6,153

21,636*

$23.06

5,770,874

12.0%

422,665

222,846

-5,061

26,460

$28.20

TOTALS

Note: RENTAL RATES: WEIGHTED AVERAGE, Exchange Rate: 1USD = KRW 1,046
*Quoted rents for prime properties such as One IFC, Two IFC, Three IFC and FKI building exceed the average market rent by nearly 35%.

MARKET HIGHLIGHTS
Significant Q3 2014 Lease Transactions

SUBMARKET

TENANT

BUILDING CLASS

Seoul Square

CBD

Exxon Mobile

512

AIA Tower

CBD

Pearson Education Korea

700

Donghoon Tower

GBD

LG Uplus

990

GS Tower

GBD

Bridgestone Korea

NA

FKI Tower

YBD

KEB Futures

2,022

Significant Q3 2014 Sale Transactions

SUBMARKET

BUYER

PURCHASE PRICE

Hanjin Heavy Ind & Const HQ

CBD

Vestas Investment MGMT

113,700,000,000

31,787

Hyundai Securities HQ

YBD

Hana Financial Group

81,000,000,000

20,426

MAJOR TENANT

COMPLETION DATE

SQUARE METER

SQUARE METER

Significant Q3 2014 Construction Completions SUBMARKET

SQUARE METER

SQUARE METER

NA

Significant Projects Under Construction

SUBMARKET

MAJOR TENANT

COMPLETION DATE

Olleh-Plex (KT Headquarter)

CBD

KT

4Q 2014

52,502

GL building (Cheongjin 8 District)

CBD

NA

4Q 2014

51,752

D Tower (Cheongjin 2-3 District)

CBD

NA

4Q 2014

106,215

Cushman & Wakefield (Korea) Ltd.

6F Seoul Finance Center, 136, Sejong-daero

Jung-gu Seoul, 100-768, Korea
www.cushmanwakefield.com/knowledge

For more information, contact:

Judy Jang, Senior Manager
+82 2 318 8322
judy.jang@ap.cushwake.com

The market terms and definitions in this report are based on NAIOP standards. No warranty or
representation, express or implied, is made to the accuracy or completeness of the information
contained herein, and same is submitted subject to errors, omissions, change of price, rental or other
conditions, withdrawal without notice, and to any special listing conditions imposed by our principals.
2014 Cushman & Wakefield, Inc. All rights reserved.