According to a recent report by JLL, the Seoul office market is facing a significant change. A large number of new office spaces in the city centre is leading to an increase in vacancy rates, which are currently at their highest level in more than four years. This development is prompting institutional investors to adopt an increasingly selective stance, even though rental prices continue to rise.
JLL forecasts that in 2026, supply growth in Seoul's office sector will reach a level not seen in over a decade. This is expected to lead to an oversupply, thereby strengthening tenants' negotiating position. Particularly in the CBD (Central Business District), the Gangnam Business District (GBD), and the Yeouido Business District (YBD), the dynamic will shift in favour of tenants.
Impact on Rents and Vacancy
The report highlights that prime rents in the first quarter of 2024 increased by 0.6% compared to the previous quarter and by 4.4% year-on-year. This indicates continued robust demand in certain segments, but the impending increase in supply could dampen this trend. The overall vacancy rate rose to 6.8% in the first quarter of 2024, an increase of 130 basis points from the previous quarter.
For the full year 2024, a further increase in vacancy rates is projected, expected to exceed 7%. This development is a direct consequence of the extensive construction programme. The completion of major projects such as One Parnas Tower, part of the Global Business Center, and the Gangnam International Center will further pressure the market.
Market Strategies and Investor Behaviour
In view of these prospects, institutional investors will need to re-evaluate their investment strategies. The increased selection of available space could lead to stronger competition among landlords, which in turn should enhance the attractiveness of high-quality and sustainable office properties with flexible lease terms. It is expected that the focus on ESG (Environmental, Social, and Governance) criteria will become even more prominent in new investments.
- —JLL expects record supply growth in the Seoul office market for 2026.
- —Vacancy rates reached 6.8% in Q1 2024, the highest level in over four years.
- —Prime rents increased by 4.4% year-on-year but could be dampened by increased supply.
- —Institutional investors are becoming more selective, and tenants have a stronger negotiating position.
