The prime office market in core business districts in Seoul is expected to remain strong, said Savills Korea chief, citing limited new supply and the expansion of a high-speed commuter rail network as key drivers.
“The actual amount of new office supply in Seoul’s central business district will likely fall far short of projections,” Lee Soo-jeong, Savills Korea’s chief executive officer and head of Investment Advisory, said in an interview with The Korea Economic Daily on Monday.
Over the next five years, an estimated 2.5 million square meters of new office space are expected to be added to Seoul’s central business district, known as the CBD. That figure is roughly three times the total supply added over the past decade.
But a detailed survey by Savills Korea of approved real estate developments in the area found that 30% to 40% of these projects face delays or have failed to win project financing.
She believes the prime office segment remains resilient, supported by stable tenants and competitive sale prices.
“Prime offices up for grabs in the CBD typically have long-term, creditworthy tenants, and their price tags are highly competitive,” said Lee.
“Prime buildings with strong building features will continue to be attractive to occupiers, often more so than new builds when considering cost-efficiency.”
The CBD, centered around Seoul’s Gwanghwamun district, is home to multinational corporations, major domestic firms, financial institutions and government agencies. The density of demand anchors the leading market, Lee noted.
GTX RAIL SEEN AS GAME-CHANGER
Savills Korea’s CEO Lee Soo-jeong
The head of Savills Korea also sees the expansion of the GTX high-speed commuter rail network, connecting central Seoul to Seoul metropolitan areas such as Gyeonggi Province and Incheon, as a key upside driver in investment in the central district.
“With the expansion of the GTX-A line and the upcoming opening of GTX-B, connectivity from Seoul Station to major business areas like Gangnam and Yeouido will improve significantly,” she said.
“That could be a major factor for rent-sensitive tenants considering a move to the CBD … GTX will be a game changer in the office market.”
NEED EYES FOR HIGH-QUALITY ASSETS
Lee acknowledged that more commercial buildings are hitting the market as real estate funds launched during the COVID-19 pandemic begin to reach maturity. Some funds, she said, have failed to close transactions amid shifting market conditions.
“Office investments are expected to go through a process of separating the wheat from the chaff.”
She added that recent interest rate declines and new blind-pool funds launched by institutional players such as the National Pension Service and Korea Post could catalyze renewed investment activity.
Lee joined Savills Korea in 2011 and has been spearheading real estate transactions as CEO and head of Investment Advisory since 2018.
She succeeded in extending her CEO term for another three years late last year.
A total real estate transaction volume she has led until the first half of this year valued 27 trillion won ($19.5 billion).
Write to Gyeong-Jin Min at min@hankyung.com Sookyung Seo edited this article.
