While new building construction has contributed to the rising office vacancies in Seoul, job losses seem to be dealing a large blow to Yeouido, the financial district. The lowest brokerage industry earnings since early 2005 were recorded, leading to slashing of domestic branches and a corresponding number of brokers being let go. At the end of Q2, the 24.8 percent Seoul office vacancy rate still pales in comparison to Wall Street’s during the height of the global financial crisis.
Investors have not been deterred – Seoul was the most active office market outside of Japan over the last year beating out Singapore and Hong Kong by close to $7 billion. According to leading commercial real estate data and analytics firm Real Capital Analytics (RCA), the cap rate for Seoul office space was just 5.67 percent with the price per square foot increasing to $400.3 at the end of last month.
Some expect the overall Seoul vacancy rate to drop over the next year due to relocations by large tenants like IBM Korea. The recovery for Yeouido will still rely on main tenants, the brokerage houses and other financial institutions to regain their strength and profitability.