05 Jan 2017

What Happens to Seoul Office Markets in 2017?

The vacancy rate of office leasing markets is expected to increase in 1H 2017 but will decrease in 2H 2017.

Colliers International Korea, a leading global real estate service company has published a research & forecast report about the Seoul office markets for the new coming year 2017. According to the Colliers report, in 2017, due to the steady domestic economic growth and increasing global uncertainty, the demand for rental office is expected to decrease and the vacancy rate of Seoul offices is expected to be 9.8%P which increased by 0.9%P against 4Q 2016. The vacancy rate is expected to increase to 9.9%P especially due to the effects of newly supplied office buildings in 1H 2017 and some of the tenant relocation are scheduled from current offices, and then it would decrease slightly in 2H 2017 as the expectation.

The volume of office transaction market is expected to be 32 office buildings with KRW 5,870 billion won (USD 5 billion) which will remain same as the average value in the previous quarter.  

The volume of transaction in the office transaction market in 2016 reached KRW 3,769 billion won (USD 7.09 billion) with 83 office buildings, historically the highest level of transaction volume. However, in 2017, the transaction volume is expected to decrease to KRW 8,700 billion won (USD 7.41 billion) with 32 office buildings. It is around 105.3% of the overall transaction volume in the last 5 years and it means the transaction volume would be almost same as in the average year.

Especially, due to the delayed transaction expected to be completed by 4Q 2016, it will increase the volume of planned sales in 1Q 2017. However, the interest rates which showing positive trend recently is expected to cause the fund-raising expense increase, and there is a high possibility of occurring a burden to office transaction market.

The experts in office transaction markets expect that the transaction market is expected to go into a recession from boom period and the leasing market is expected to recover from the recession.

For this report, Colliers International Korea has conducted a survey of experts and they expressed concern that the transaction market seems to be recessed in 2017 through the booming period in 2016. The leasing market is expected to be remained in recession but to be recovered. As the result of the survey, domestic tenants seem to have strong interests in the core asset and the investment in the unsubordinated debt, and the AMCs seem to have more interests in the value-add asset and logistic centers which leading more rate of return relatively.



For further information, please contact:

Myeonghan Yu, Manager
Research & Advisory, Colliers International Korea
Phone: +82 2 3775 7236
Email: Myeonghan.Yu@colliers.com