Seoul prime office rents up, despite economic downturn

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2009-01-20 14:27

서울--(뉴스와이어)--Results from Savills Korea’s latest office survey, released today, showed Seoul prime office rents continued their upward trend into the fourth quarter of 2009.

Increases in office rents are generally rare towards the end of the year. However, rents rose in nearly 20 per cent of prime buildings during the fourth quarter of 2008, leading to an average 0.8 per cent increase in rents compared with September 2008. On an annual basis this saw the rate of increase lift to 7.6 per cent, the fastest rate of annual rental growth since 2001.

“The increase in office rents during last quarter is unique, with the economic downturn having led to cuts in commercial rents across virtually every other major market around the world,” said Ms JoAnn Hong, who heads up Savills Korea’s Research Department.

However, the global economic crisis is clearly beginning to affect the commercial leasing market, with the average vacancy rate in prime office buildings rising from a record low of 0.3 per cent in September, to 1.2 per cent in December 2008. By business district, average vacancy rates were 1.5 per cent, 0.7 per cent and 1.3 per cent for the CBD, Gangnam, and Yeouido respectively.

“Economic pressures have caused some tenants to move out from prime office space to cheaper, lower quality spaces. Staff cutbacks are also beginning to have an impact.” said Ms Hong.

Deteriorating economic conditions will inevitably lead to further reductions in demand and associated increases in vacancy over the year ahead. However, the ongoing shortage in prime office supply means that Seoul’s average vacancy rates are likely to remain below 5 per cent through to the end of the year – a favorable situation compared with the outlook facing other major office markets around the region.

Furthermore, current credit problems are causing delays for many commercial development projects. “By reducing pipeline supply, construction delays will help keep vacancy rates low over the medium term.” concluded Ms Hong.
The Savills Korea Prime Office Market Survey, released quarterly, is the longest running and most extensive survey of prime office stock in Seoul. Established in 1994, Savills Korea is the leading provider of commercial real estate services in South Korea.

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