RSQUARE Holds Safety Education Session for Partners |
RSQUARE recently hosted a major safety education session for CEOs of partnered companies at its Seoul headquarters. With 80 executives as attendees, the initiative aimed to elevate safety awareness and enhance autonomous management practices among RSQUARE's partners. Key topics of the program included safety systems implementation and the implications of the Serious Accidents Punishment Act. By organizing this event, RSQUARE showcased its commitment to preventing major site accidents and fostering a culture of safety awareness across its network. The company aims to actively support its partners in establishing a robust safety and health system, and intends to recognize its outstanding performers in the field. RSQUARE's initiative underscores the importance of leadership; while worker awareness is important, true change must be driven from the top with CEOs playing a pivotal role in prioritizing and investing in safety measures. Through the initiative, RSQUARE hopes to spark a renewed focus on workplace safety, encouraging its partners to implement practical safety management strategies across all their operations. This proactive approach highlights RSQUARE's dedication to not only its own safety standards but also to elevating the safety practices of its entire business ecosystem. |
RSQUARE Selected to Lead the Construction of the Enter6 Hanyang University Complex Office Project |
RSQUARE has been chosen to transform the Enter6 Hanyang University Branch from a shopping mall into a mixed-use office complex. The project represents a significant shift in urban development, repurposing the space from a struggling commercial space into a vibrant business hub. RSQUARE comprehensive involvement includes investment, leasing strategy, and construction management through its subsidiaries. The company already secured tenants from startups from IT and Biotech based on its extensive data-driven approach. The project is poised to revitalize the area given its prime location near major transit hubs and the upcoming Wangsimni Business Town. Industry experts are optimistic about the project's success, citing RSQUARE's multifaceted expertise in strategy, leasing, and design. This initiative marks the evolving landscape of commercial real estate in Seoul, adapting to post-pandemic realities and embracing the concept of mixed-use developments. |
The Secret of Gangnam's Small Office Buildings: A Unique Ecosystem Created by Urban Planning History |
The small office building market in Seoul's Gangnam district is showing a unique phenomenon that defies common investment sense. RSQUARE's latest data analysis provides a breakdown of the paradox alluding to its historical background and its distinct urban landscape.
According to RSQUARE's R.A (Real Estate Analytics) system, the ‘24.Q2 average cap rate of small office buildings in Seoul stood at 3.2%, significantly lower than that of medium and large buildings at 4.5%. Average sale price, however, was 35 million won per py (pyeong) for small that exceeded the 32 million won/py for medium. The answer to this paradox lies in the 'potential development value' and 'Gangnam's unique urban planning history'.
Gangnam’s development dates back to the 1970s. The government led the initiative of developing Gangnam, formerly bucolic, in the 1980s to ease the overcrowding in Gangbuk. According to R.A's historical data, the early Gangnam was mostly residential (92% residential, 8% commercial), broken down into small lots.
The small land lots had a significant impact on shaping the characteristics of Gangnam's real estate market. R.A's ownership data analysis shows that in the 1980s, up to 85% of the commercial real estate in Gangnam were owned by individuals. Due to small plots, investments were driven by individuals rather than corporations, and many bought for speculative purposes that resulted in shortage of new building constructions.
In response, the government implemented the Excessive Land Profits Tax in 1989 to increase the new building supply. The policy promoted new office building constructions in Gangnam, but construction costs became burdensome due to small plots and dominant individual ownership; this left the new supply focused on small offices rather than medium to large.
In the late 1980s, the government's urban landscape improvement policy made Gangnam's skyline even more complex. The 1984 'Teheran-ro Urban Design Guidelines' set the minimum land area to 600㎡ along Teheran-ro and 1,000㎡ around intersections. This incentivized the individual owners to initiate developments through land consolidation, resulting in large office buildings in areas adjacent to Teheran-ro.
However, a different landscape unfolded on the back streets where these standards did not apply. According to R.A's Geographic Information System (GIS) analysis, the density of small buildings on Gangnam Teheran-ro's back streets was three times higher than on Teheran-ro itself.
This is a phenomenon unique to Gangnam. R.A's urban planning data analysis shows that Yeouido, which was developed around the same time, had larger plots and was mainly supplied with medium to large office buildings. As of 2024, the average gross floor area of offices in Yeouido is 33,000㎡, six times larger than the average of 5,500㎡ for offices on Gangnam Teheran-ro's back streets.
This unique urban structure of Gangnam has become a factor in increasing the potential value of small office buildings. According to R.A's floor area ratio analysis, the average actual floor area ratio of small office buildings in Gangnam-gu is only 70% of the legal floor area ratio. This offers the additional 30% area up for grabs in case of redevelopment.
In fact, 35% of the small office building transactions brokered by RSQUARE in the first half of 2024 were for redevelopment purposes, of which 80% were buildings located on back streets. This is a 13 percentage point increase compared to the same period last year.
Small office buildings also show unique characteristics in investment patterns. According to R.A data, the proportion of individual ownership of small office buildings was 78%, more than twice as high as the 35% for medium and large buildings. In the first half of 2024, 65% of small office building buyers were individual investors, and 80% of them used rental deposits as leverage to lower their equity ratio.
Gangnam's small office building market is a unique ecosystem born from the intersection of Seoul's urban planning history and real estate investment trends. While it offers a low yield on the surface, it also harbors a valuable redevelopment potential.
At times, cold data, composed of 0s and 1s, best explains the urban history and the hot enthusiasm of the real estate market; the small office building market in Gangnam proves to be the case. Behind the tall buildings on the main streets, small buildings on back streets coexist with Gangnam's past and future.
The Gangnam small office building market is not just a real estate investment target. It is a microcosm of Seoul's urban planning history, the evolution of government policies, and the complex intertwining of individual investors' dreams and ambitions. Understanding this unique ecosystem will be the key to reading Seoul's past and predicting its future. |
The New World of Fashion and Beauty: Seongsu - a Playground for Major Company |
"Never seen anything like it"
Last weekend, I roamed the streets of Seongsu-dong in Seoul, camouflaged as Gen MZ. After visiting the newly opened Musinsa offline store, I noticed the new Olive Young store opened right across the street. The online fashion powerhouse facing off the No.1 offline health & beauty store on the same street offered a striking view. Seongsu-dong has evolved far beyond being just a hipster sanctuary; it has become the new battleground for retail giants. What caught their attention? Which side is Gen MZ on?
Seongsu-dong is emerging as a new battleground for the beauty and fashion industries, particularly with the competition between Olive Young, the health and beauty enterprise, and Musinsa, the fashion platform. Both have captured the hearts of Gen MZ in their respective domains and are now challenging each other's territories.
Presence of mega brands in Seongsu-dong is also shifting the local commercial real estate market. According to the Korea Real Estate Board's commercial real estate rental trend survey, as of Q4 2023, the rent for medium and large-sized stores in Seongdong-gu, which includes Seongsu-dong, increased by 5.7% year-on-year. This significantly surpasses Seoul's average increase of 3.2%. The increase is particularly pronounced near the cafe street where Olive Young and Musinsa have opened stores. According to RSQUARE, the first-floor rent in this area jumped from about 150,000 won/py in 2022 to 250,000 won/py in early 2024 that recorded a 66% increase.
Olive Young has been targeting Gen MZ by leveraging its offline stores. The convenience of experiencing and purchasing various brands in a single venue, the ability to test new products on site, and the trendy vibes have resonated with the young generation. In contrast, Munsinsa began as an online fashion platform, targeting Gen MZ's online shopping habits with its user-friendly UI/UX, diverse brands and styles, and unique content strategy.
Why these two mega brands chose Seongsu-dong as their offline battleground is clear; Seongsu-dong emerged as the ‘go-to neighborhood’ in recent years, drawing Gen MZ with unique cafes, restaurants, and select shops that pass their vibe checks. The industrial environment also provides a suitable backdrop for brands to express their identity.
It's not easy to foresee who has the edge in the competition. Olive Young boasts proven offline operation know-hows and an extensive store network. Musinsa showcases personalized services based on a deep understanding of Gen MZ's online shopping habits and data. Ultimately, the winner will be determined based on how effectively they integrate online and offline channels. |
Commercial Real Estate remains concerned as TMON-WeMakePrice Supplier Bankruptcies Continue |
Commercial real estate industry is concerned as the aftermath of the TMON-WeMakePrice crisis continues with partner companies filing for bankruptcy protection one after another.
As sales plummet due to delayed settlements, an increasing number of small and medium-sized partners and suppliers are unable to withstand the pressure and are filing for bankruptcy protection. This led to a sharp rise in companies downsizing their offices or closing them altogether to cut costs. Vacancies near Nonhyeon and Yeoksam stations are rapidly increasing as most e-commerce-related partners are concentrated around the area.
According to the industry and the Financial Supervisory Service on the 19th, while the estimated unsettled amount for TMON and WeMakePrice partners and suppliers reached 1.3 trillion won, the vacancy rate in the office market rapidly rose around Nonhyeon and Yeoksam stations in Seoul's Gangnam-gu - the primary location for these businesses.
Those that can still manage are reducing staff and downsizing offices, but those who cannot are closing their offices entirely. In fact, Company A, which was a major fashion partner of TMON, vacated its 300 py office near Gangnam Station due to financial difficulties caused by delayed settlements and reduced its staff by 30%. The company is currently operating from a 50-py office in Nonhyeon-dong. Beauty brand Company B, which had an exclusive contract with WeMakePrice, saw its sales plummet due to delayed settlements and cleared out its flagship store and office in Cheongdam-dong, switching to a work-from-home system.
As the e-commerce market falters, not only partner companies but also logistics centers are facing operational difficulties and considering repurposing. Logistics center C, located in Gangdong-gu, Seoul, considers repurposing to a data center as its utilization rate has fallen below 50% due to reduced volume from TMON-WeMakePrice.
A real estate agent near Yeoksam Station said, "Recently, as tenants in Yeoksam and Nonhyeon areas are quickly moving out, building owners are facing pressure to lower rents. Some building owners are considering or proposing rent reductions or offering various amenities as incentives to attract tenants."
Industry experts predict that after the TMON-WeMakePrice crisis, e-commerce partners and suppliers concentrated in Gangnam and Nonhyeon are likely to disperse to areas with cheaper rents. |
Sizeable Vacancies Expected in the Heart of Seoul |
The Central Business District (CBD) around Gwanghwamun, which boasted nearly 100% occupancy rates despite uncertain economic conditions, is expected to suffer from vacancy pains in the future. This is due to the concentration of large-scale new supply through reconstruction projects after the second half of 2026.
According to the commercial real estate industry on the 18th, from 2026, office supply of about 400,000㎡ in gross floor area is scheduled in areas such as Gongpyeong, Supyo, Sewoon districts, and Hyoje-dong in Jongno-gu. This large-scale office volume, equivalent to 55 soccer fields, will be concentrated from the second half of 2026 to 2027.
Therefore, a rise in vacancy rates is inevitable in the future for this region. According to real estate data provider RSQUARE, the office vacancy rate (including new construction) in the CBD area in the second quarter was 2.6%, significantly below the natural vacancy rate of 5%.
The CBD is expanding to both east and west. To the east, prime grade offices will be supplied beyond the Gongpyeong and Sewoon districts to Hyoje-dong near Gwangjang Market. To the west, areas around Sunhwa-dong and Hoehyeon-dong near Seoul Station are also expanding through various redevelopment projects.
Moreover, projects originally planned for residential use are changing to office use due to construction costs, leading to concerns about oversupply. For example, the Sewoon 6-3-3 district project, which aimed to be "Korea's Roppongi Hills," changed its plan from urban living housing to office use due to soaring construction costs.
Other major projects include: - Gongpyeong 15·16 district: 143,431.88㎡ office and commercial facilities - Hyoje-dong office development: 77,119㎡ office building by DL E&C - Supyo Urban Environment Improvement Project: 117,813㎡ large-scale office building
An industry insider commented, "Until now the CBD area has had high demand and low supply, but the simultaneous progress of large-scale redevelopment projects will inevitably lead to vacancies in the coming years. Nevertheless, the area is still a preferred business ground for government, public institutions, foreign companies, and domestic conglomerates - vacancies won't be a significant problem in the mid to long term." |
Factory and Warehouse Sales Increase by 19%... 568 Transactions in July, Worth 1.7 Trillion Won |
July 2024 saw a significant uptick in factory and warehouse real estate transactions across South Korea, with 568 deals totaling 1.7 trillion won. This represents a 19.1% increase in transaction volume and a 2.3% increase from June. Chungbuk province led the growth with a remarkable 1,296% increase in transaction value. Other regions, including Jeonnam, Ulsan, Daegu, Sejong, and Gangwon, also experienced substantial growth. In the Seoul metropolitan area, both Seoul and Incheon saw significant increases in transaction values. Gyeonggi Province, the country's largest market for such properties, saw an increase in the number of transactions but a decrease in total value. A notable large-scale transaction involved LaSalle Asset Management's acquisition of a warehouse in Anseong for 318 billion won. Industry experts suggest that such activity indicates a gradual recovery of the logistics center market following a period of oversupply. This trend reflects changing dynamics in the commercial real estate sector, potentially influenced by shifts in industrial and e-commerce activities. |
Seoul Commercial Real Estate Hits Bottom: Recovery Slower Than Apartments |
Seoul's commercial real estate market is showing signs of recovery after a period of sluggishness due to high interest rates. In July 2023, the number of commercial building transactions in Seoul increased by 23% compared to the previous month, totaling 187 deals worth 2 trillion won. Although the figure represents a 28.9% decrease from June, it marks a 81.2% increase in YoY. Investment returns are also on the rise, with office spaces in Seoul showing a 1.99% return in Q2, up 0.15 percentage points from the previous quarter. The Gangnam district, in particular, saw significant increases in both office and retail space returns. However, the recovery of commercial real estate is still slower than the residential market, where apartment prices are hitting new records. Industry experts suggest that while the market has not reached the level of the 2020-2021 boom, it is maintaining a positive trend, with expectations of continued stability amid anticipation of potential interest rate cuts. |
"The Rise of the Second Yeouido IFC" Speeding Up PF Restructuring |
A major mixed-use business facility named 'One Grove' was completed in Seoul's Magok district, comparable in size to Yeouido's International Finance Center. Despite challenges in the construction sector, the project was finished on schedule with support from creditors. The project was seen as a landmark development that can potentially establish Magok as the new office district in Seoul. Its completion comes amid a broader context of project financing (PF) restructuring in South Korea. About 300 PF projects have been identified as potentially problematic, with loans totaling 13.5 trillion won. The government stepped in to sort out the viable and the struggling, supporting the former but toughening loan requirements for the latter. The success of projects like One Grove and the recovery in certain real estate markets suggest that location and growth potential remain crucial factors in determining project viability. This situation highlights the complex interplay between urban development, real estate markets, and financial policies in South Korea's evolving economic landscape. |
RSQUARE Analytics Updates - 2024,Q2 |
The latest quarterly data collected and processed by RSQUARE Information Division and Research Centre has been updated.
RSQUARE data is updated quarterly. - It is updated about 1.5 months after the end of the quarter. - As a result, Alsquare data for Q3 2024 will be updated in mid-November 2024. |
Tenant Information Service beta has been added: - Tenant information is only available for the 1000+ offices and warehouses that Alsquare surveys, so it doesn't include the full tenancy breakdown by company. - In the future, we plan to improve the data both quantitatively and qualitatively by using information from DART, corporate/real estate registry, etc.
Select "Tenants (beta)" from the left menu to view your tenants' status. - Offices: 14,938 tenants, 961 buildings - Warehouses: 996 tenants, 455 buildings
Filters: You can use various filter criteria to find the tenants you want.
Tenant details: When you select a tenant, you'll see their basic information and occupancy status.
Tables: View information about multiple tenants with the desired conditions in a table, with the option to download an Excel.
Analytics: You can also see the percentage of leased space by tenant type and size. |
Improved map markers on the RSQUARE data exploration web: When the number of buildings on the map screen is 500 or less, markers for each building are displayed. Previously, all markers were provided as "bubble markers" without any marker settings, and many users felt that the markers obscured a lot of values. We've improved the markers to display as "dot markers" when there are no marker settings (however, when zoomed in to a map scale of 50m or less, all markers are displayed as bubble markers). The default value for the marker setting is "Rent", so buildings with rent information for the most recent quarter are displayed as "bubble markers" and buildings without rent information are displayed as "dot markers".
MOLIT real transaction prices: 2023.11 ~ 2024.07 update MOLIT real transaction price data has not been updated since November 2023. We have updated it in batches this time! However, the December 2023 commercial/office real transaction data is still missing, but we will add it next month. MOLIT real transaction prices will be updated monthly from now on!
Improved notation for amounts and area units (map markers and lists) Previously, the unit notation was fixed regardless of the size of the number. - Very large values were difficult to read due to the large number of digits. - If the value was too small, it would look like "0.0 billion won" or "0.0 million won/pyeong", so we made it easier to read. |
Get insights into the Korean CRE market from RSQUARE Universe. Recommend to others interested in the Korean CRE market. |
Office, warehouse, and retail leasing brokerage,
transaction advisory, asset management, and data analytics,
Interior & Remodeling, Overseas Business (Vietnam, Singapore) |
|
The small office building market in Seoul's Gangnam district is showing a unique phenomenon that defies common investment sense. RSQUARE's latest data analysis provides a breakdown of the paradox alluding to its historical background and its distinct urban landscape.
According to RSQUARE's R.A (Real Estate Analytics) system, the ‘24.Q2 average cap rate of small office buildings in Seoul stood at 3.2%, significantly lower than that of medium and large buildings at 4.5%. Average sale price, however, was 35 million won per py (pyeong) for small that exceeded the 32 million won/py for medium. The answer to this paradox lies in the 'potential development value' and 'Gangnam's unique urban planning history'.
Gangnam’s development dates back to the 1970s. The government led the initiative of developing Gangnam, formerly bucolic, in the 1980s to ease the overcrowding in Gangbuk. According to R.A's historical data, the early Gangnam was mostly residential (92% residential, 8% commercial), broken down into small lots.
The small land lots had a significant impact on shaping the characteristics of Gangnam's real estate market. R.A's ownership data analysis shows that in the 1980s, up to 85% of the commercial real estate in Gangnam were owned by individuals. Due to small plots, investments were driven by individuals rather than corporations, and many bought for speculative purposes that resulted in shortage of new building constructions.
In response, the government implemented the Excessive Land Profits Tax in 1989 to increase the new building supply. The policy promoted new office building constructions in Gangnam, but construction costs became burdensome due to small plots and dominant individual ownership; this left the new supply focused on small offices rather than medium to large.
In the late 1980s, the government's urban landscape improvement policy made Gangnam's skyline even more complex. The 1984 'Teheran-ro Urban Design Guidelines' set the minimum land area to 600㎡ along Teheran-ro and 1,000㎡ around intersections. This incentivized the individual owners to initiate developments through land consolidation, resulting in large office buildings in areas adjacent to Teheran-ro.
However, a different landscape unfolded on the back streets where these standards did not apply. According to R.A's Geographic Information System (GIS) analysis, the density of small buildings on Gangnam Teheran-ro's back streets was three times higher than on Teheran-ro itself.
This is a phenomenon unique to Gangnam. R.A's urban planning data analysis shows that Yeouido, which was developed around the same time, had larger plots and was mainly supplied with medium to large office buildings. As of 2024, the average gross floor area of offices in Yeouido is 33,000㎡, six times larger than the average of 5,500㎡ for offices on Gangnam Teheran-ro's back streets.
This unique urban structure of Gangnam has become a factor in increasing the potential value of small office buildings. According to R.A's floor area ratio analysis, the average actual floor area ratio of small office buildings in Gangnam-gu is only 70% of the legal floor area ratio. This offers the additional 30% area up for grabs in case of redevelopment.
In fact, 35% of the small office building transactions brokered by RSQUARE in the first half of 2024 were for redevelopment purposes, of which 80% were buildings located on back streets. This is a 13 percentage point increase compared to the same period last year.
Small office buildings also show unique characteristics in investment patterns. According to R.A data, the proportion of individual ownership of small office buildings was 78%, more than twice as high as the 35% for medium and large buildings. In the first half of 2024, 65% of small office building buyers were individual investors, and 80% of them used rental deposits as leverage to lower their equity ratio.
Gangnam's small office building market is a unique ecosystem born from the intersection of Seoul's urban planning history and real estate investment trends. While it offers a low yield on the surface, it also harbors a valuable redevelopment potential.
At times, cold data, composed of 0s and 1s, best explains the urban history and the hot enthusiasm of the real estate market; the small office building market in Gangnam proves to be the case. Behind the tall buildings on the main streets, small buildings on back streets coexist with Gangnam's past and future.
The Gangnam small office building market is not just a real estate investment target. It is a microcosm of Seoul's urban planning history, the evolution of government policies, and the complex intertwining of individual investors' dreams and ambitions. Understanding this unique ecosystem will be the key to reading Seoul's past and predicting its future.
"Never seen anything like it"
Last weekend, I roamed the streets of Seongsu-dong in Seoul, camouflaged as Gen MZ. After visiting the newly opened Musinsa offline store, I noticed the new Olive Young store opened right across the street. The online fashion powerhouse facing off the No.1 offline health & beauty store on the same street offered a striking view. Seongsu-dong has evolved far beyond being just a hipster sanctuary; it has become the new battleground for retail giants. What caught their attention? Which side is Gen MZ on?
Seongsu-dong is emerging as a new battleground for the beauty and fashion industries, particularly with the competition between Olive Young, the health and beauty enterprise, and Musinsa, the fashion platform. Both have captured the hearts of Gen MZ in their respective domains and are now challenging each other's territories.
Presence of mega brands in Seongsu-dong is also shifting the local commercial real estate market. According to the Korea Real Estate Board's commercial real estate rental trend survey, as of Q4 2023, the rent for medium and large-sized stores in Seongdong-gu, which includes Seongsu-dong, increased by 5.7% year-on-year. This significantly surpasses Seoul's average increase of 3.2%. The increase is particularly pronounced near the cafe street where Olive Young and Musinsa have opened stores. According to RSQUARE, the first-floor rent in this area jumped from about 150,000 won/py in 2022 to 250,000 won/py in early 2024 that recorded a 66% increase.
Olive Young has been targeting Gen MZ by leveraging its offline stores. The convenience of experiencing and purchasing various brands in a single venue, the ability to test new products on site, and the trendy vibes have resonated with the young generation. In contrast, Munsinsa began as an online fashion platform, targeting Gen MZ's online shopping habits with its user-friendly UI/UX, diverse brands and styles, and unique content strategy.
Why these two mega brands chose Seongsu-dong as their offline battleground is clear; Seongsu-dong emerged as the ‘go-to neighborhood’ in recent years, drawing Gen MZ with unique cafes, restaurants, and select shops that pass their vibe checks. The industrial environment also provides a suitable backdrop for brands to express their identity.
It's not easy to foresee who has the edge in the competition. Olive Young boasts proven offline operation know-hows and an extensive store network. Musinsa showcases personalized services based on a deep understanding of Gen MZ's online shopping habits and data. Ultimately, the winner will be determined based on how effectively they integrate online and offline channels.
Commercial Real Estate remains concerned
as TMON-WeMakePrice Supplier Bankruptcies Continue
Commercial real estate industry is concerned as the aftermath of the TMON-WeMakePrice crisis continues with partner companies filing for bankruptcy protection one after another.
As sales plummet due to delayed settlements, an increasing number of small and medium-sized partners and suppliers are unable to withstand the pressure and are filing for bankruptcy protection. This led to a sharp rise in companies downsizing their offices or closing them altogether to cut costs. Vacancies near Nonhyeon and Yeoksam stations are rapidly increasing as most e-commerce-related partners are concentrated around the area.
According to the industry and the Financial Supervisory Service on the 19th, while the estimated unsettled amount for TMON and WeMakePrice partners and suppliers reached 1.3 trillion won, the vacancy rate in the office market rapidly rose around Nonhyeon and Yeoksam stations in Seoul's Gangnam-gu - the primary location for these businesses.
Those that can still manage are reducing staff and downsizing offices, but those who cannot are closing their offices entirely. In fact, Company A, which was a major fashion partner of TMON, vacated its 300 py office near Gangnam Station due to financial difficulties caused by delayed settlements and reduced its staff by 30%. The company is currently operating from a 50-py office in Nonhyeon-dong. Beauty brand Company B, which had an exclusive contract with WeMakePrice, saw its sales plummet due to delayed settlements and cleared out its flagship store and office in Cheongdam-dong, switching to a work-from-home system.
As the e-commerce market falters, not only partner companies but also logistics centers are facing operational difficulties and considering repurposing. Logistics center C, located in Gangdong-gu, Seoul, considers repurposing to a data center as its utilization rate has fallen below 50% due to reduced volume from TMON-WeMakePrice.
A real estate agent near Yeoksam Station said, "Recently, as tenants in Yeoksam and Nonhyeon areas are quickly moving out, building owners are facing pressure to lower rents. Some building owners are considering or proposing rent reductions or offering various amenities as incentives to attract tenants."
Industry experts predict that after the TMON-WeMakePrice crisis, e-commerce partners and suppliers concentrated in Gangnam and Nonhyeon are likely to disperse to areas with cheaper rents.
Sizeable Vacancies Expected
in the Heart of Seoul
The Central Business District (CBD) around Gwanghwamun, which boasted nearly 100% occupancy rates despite uncertain economic conditions, is expected to suffer from vacancy pains in the future. This is due to the concentration of large-scale new supply through reconstruction projects after the second half of 2026.
According to the commercial real estate industry on the 18th, from 2026, office supply of about 400,000㎡ in gross floor area is scheduled in areas such as Gongpyeong, Supyo, Sewoon districts, and Hyoje-dong in Jongno-gu. This large-scale office volume, equivalent to 55 soccer fields, will be concentrated from the second half of 2026 to 2027.
Therefore, a rise in vacancy rates is inevitable in the future for this region. According to real estate data provider RSQUARE, the office vacancy rate (including new construction) in the CBD area in the second quarter was 2.6%, significantly below the natural vacancy rate of 5%.
The CBD is expanding to both east and west. To the east, prime grade offices will be supplied beyond the Gongpyeong and Sewoon districts to Hyoje-dong near Gwangjang Market. To the west, areas around Sunhwa-dong and Hoehyeon-dong near Seoul Station are also expanding through various redevelopment projects.
Moreover, projects originally planned for residential use are changing to office use due to construction costs, leading to concerns about oversupply. For example, the Sewoon 6-3-3 district project, which aimed to be "Korea's Roppongi Hills," changed its plan from urban living housing to office use due to soaring construction costs.
Other major projects include:
- Gongpyeong 15·16 district: 143,431.88㎡ office and commercial facilities
- Hyoje-dong office development: 77,119㎡ office building by DL E&C
- Supyo Urban Environment Improvement Project: 117,813㎡ large-scale office building
An industry insider commented, "Until now the CBD area has had high demand and low supply, but the simultaneous progress of large-scale redevelopment projects will inevitably lead to vacancies in the coming years. Nevertheless, the area is still a preferred business ground for government, public institutions, foreign companies, and domestic conglomerates - vacancies won't be a significant problem in the mid to long term."
July 2024 saw a significant uptick in factory and warehouse real estate transactions across South Korea, with 568 deals totaling 1.7 trillion won. This represents a 19.1% increase in transaction volume and a 2.3% increase from June. Chungbuk province led the growth with a remarkable 1,296% increase in transaction value. Other regions, including Jeonnam, Ulsan, Daegu, Sejong, and Gangwon, also experienced substantial growth. In the Seoul metropolitan area, both Seoul and Incheon saw significant increases in transaction values. Gyeonggi Province, the country's largest market for such properties, saw an increase in the number of transactions but a decrease in total value. A notable large-scale transaction involved LaSalle Asset Management's acquisition of a warehouse in Anseong for 318 billion won. Industry experts suggest that such activity indicates a gradual recovery of the logistics center market following a period of oversupply. This trend reflects changing dynamics in the commercial real estate sector, potentially influenced by shifts in industrial and e-commerce activities.
"The Rise of the Second Yeouido IFC"
Speeding Up PF Restructuring
transaction advisory, asset management, and data analytics,
Interior & Remodeling, Overseas Business (Vietnam, Singapore)