Overall quarterly net take-up figure turns negative

• Seoul’s overall net absorption fell to -9,280 pyeong. The decrease of net absorption in the CBD down to -8,888 pyeong had the most impact, as 11st Street and Shinhan Bank moved out of the district. Yeouido’s noted -632 pyeong, while Gangnam’s logged 239 pyeong.
• Yeouido’s net absorption moved to the negative range as One Centinel has become fully vacant for refurbishment, creating 19,763 pyeong of newly-vacated space. Gangnam saw the fewest leasing transactions as tenants tended to be sticky despite the high rent.

Tenant departures in CBD and Yeouido drive vacancy rate increase

• No new Grade A office introduced to the market in the quarter.
• Seoul overall vacancy rate rose 47 bps q-o-q to 3.0%, primarily due to increases in CBD and Yeouido. Yeouido’s vacancy rate reached 6.5% as One Centinel became fully vacant before renovation, while CBD’s rose to 2.8% from conglomerates’ relocations.

Closings of large-scale transactions indicate improving liquidity

• Seoul’s net effective rent in Q3 2024 was KRW 140,350 per pyeong per month, a 1.1% q-o-q and 6.7% y-o-y increase. For Gangnam, it remained flat from Q2 at KRW 153,924; Yeouido recorded KRW 120,187, while CBD saw the largest quarterly increase, reaching KRW 143,237.
• Office transaction volume in the quarter was KRW 4.6 trillion. The most notable deal was The Asset, one of the largest-ticket office transactions this year. Koramco REITs Management & Trust sold it to Samsung SRA Asset Management for about KRW 1.1042 trillion.

Outlook: Expected rate cuts may expand buyer pool

• Recent rent hikes may drive further move-outs, especially among cost-conscious companies. While prime offices are generally resilient, backed by strong tenant profiles, anchor tenant departures might result in extended rent-free periods in some cases.
• With the Fed’s 0.5% ppt rate cut, expectations for additional rate cuts in South Korea in the remainder of the year are growing. More institutional investors may now consider equity investments, in contrast to early 2024 when debt opportunities were heavily preferred.