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COVID-19 shocks on wane in Seoul’s office leasing market

Nightscape of Yeouido business district in Seoul (123rf)
Nightscape of Yeouido business district in Seoul (123rf)
The prime office market in Seoul has recently showed signs of normalization, as uncertainties due to the economic impact of the coronavirus outbreak have been on the wane in key business districts, data showed Sunday.

Demand from the information technology industry remained healthy, allowing major prime buildings to sign leases with large tenants, according to an estimate from real estate service firm Colliers International.

In Gangnam, one of the larger business districts of the city, financial technology startup Viva Republica, which operates money transfer platform Toss, expanded its office within the Korea Intellectual Property Service Center. The deal helped keep the vacancy rate in Gangnam steady at 4.2 percent in the second quarter, the estimate showed.

“Despite a few isolated clusters of infection, COVID-19 appears past its peak and under control at the end of Q2 2020,” Judy Jang, associate director and head of research at the property service firm, wrote in a note.

In the meantime, the vacancy rate fell 3.2 percentage points in the Yeouido business district to 5.9 percent, meaning the properties’ financial health improved accordingly. This is largely thanks to major leasing activities as asset management firm Korea Investment Management moved into the Federation of Korean Industries building, while the Seoul Metropolitan Government and VI Financial Group became tenants at International Finance Center Seoul.

However, the overall average vacancy rate in the city’s key districts during the second quarter rose 1.4 percentage points on-year to 7.9 percent, due to the new prime office stock since the completion of Center Point Donuimun and SG Tower in the central business district.

The figure is projected to rise to 10.1 percent by the end of 2020, then fall slightly to 9.9 percent by 2024, it added.

The office leasing market is likely to be affected by the massive relocations triggered by large supply in Yeouido -- with the scheduled completion of the Parc 1 office complex, KB Financial Town and Post Office Yeouido in the second half of 2020 -- as well as shared working space operator WeWork’s restructuring plan in Seoul, Jang wrote.

By Son Ji-hyoung (