The office building market is undergoing a tectonic shift as it suffers from the double whammy of increasing vacancies and falling rents. The upward trend in building prices has created the myth of “building invincibility” for the past 15 years, but the situation has been changing little by little recently.

According to a recent survey conducted by Remax Wide Partners, a building specialist, on 225 buildings with a floor area of 33,000㎡ (10,000 pyeong) or more in the Seoul area, the vacancy rate reached 14.3%. In particular, the downtown area and Yeouido recorded 17.5% and 16.2%, respectively, the highest figures since the 2008 global financial crisis. The Gangnam area showed relative stability, recording 9.3%.

The shrinking trend in the building market is also reflected in rent movements. In the case of buildings with a floor area of 33,000㎡ or more in the Seoul area, the average monthly rent per 3.3㎡ has been stagnant for several years at 80,000 to 110,000 won.

However, this figure is limited to nominal rent. In the case of actual rent, many buildings provide exceptional services to tenants, such as rent-free.

In particular, in the city center and Yeouido where large buildings are concentrated, rent-free is becoming common, especially in new buildings, and it was found that these areas offer rent-free for about 2 to 4 months per year.

Experts analyzed that this phenomenon was caused by a complex combination of oversupply and stagnant demand in the industrial structural context.

Choi Byeong-rok, director of Remax Wide Partners, predicted, “While the supply of office space is increasing year after year, the number of office workers in Seoul is stagnant, so the oversupply phenomenon will continue for several years.” 

He also said, “While the government, including the Ministry of Land, Infrastructure and Transport, regulates supply and demand for apartments through land supply, there is a tendency for commercial buildings to be built in droves as a result of local governments competing to build them.” He added, “It is now necessary to conduct a thorough analysis and investigation of supply and demand in the commercial building market to regulate supply and demand.”


Reporter Shin Su-jeong christy@ 

Original link: http://news.newsway.co.kr/view.php?tp=1&ud=2015090415152423488&md=20150904161122_AO