Learning Center
Plans & pricing Sign in
Sign Out

Office Snapshot


									                                                                      c o l l i e r s i n t e r n at i o n a l                 |       s e o U l , Ko r e a

                                                                      Office Snapshot
                                                                      oFFice MarKet                         |    1 s t q U a rt e r             |      2010

                                                                      slow recovery in seoul office Market
                                                                      Despite Positive signs in Korea economy
                                                                      General oVerVieW
                                                                                                                    econoMic inDicators
                                                                                                     Measure         1Q 2008   3Q 2008       1Q 2009    2Q 2009      3Q 2009          4Q 2009           1Q 2010

                                                                                                   % Yr-on-Yr          5.34%        3.09%     -4.11%     -2.08%         1.14%             6.08%             7.76%
                                                                                                   % Qt-on-Qt          1.17%        -0.10%     0.24%      2.37%         3.19%             0.17%             1.83%
  MarKet sUMMary
                                                                       CD rate (91-days)           % per annum         5.45%        5.69%      2.79%      2.41%         2.51%             2.80%             2.86%

                                             1q 2010                   Loan to Households          % per annum         6.83%        7.11%      5.48%      5.27%         5.50%             5.89%             5.82%

                                                                       Exchange rate               KRW/ USD           955.97       1062.64   1415.22    1288.68       1240.89           1168.61          1144.08

                   rental                                              Unemployment rate           % rate               3.4%         3.1%       3.8%       3.8%           3.6%              3.3%             4.7%

                                                                       Consumer Price Index(CPI)   % Yr-on-Yr          3.80%        4.67%      3.83%      3.57%         2.93%             2.80%             2.90%
                                                                                                                                                              Source : The Bank of Korea, Korea National Statistical Office

           Vacancy                                                    From the start of 2010, Korea’s economy showed an extraordinary recovery from the slowdown that
                                                                      had lasted since 4Q 2008. In fact, major economic indicators took a turn for the positive. In 1Q 2010,
                                                                      GDP growth recorded 7.76% Y-o-Y, the largest growth since the GDP growth of 8.1% Y-o-Y in 4Q
   caPital ValUe                                                      2002. In terms of production volume by industrial sector, the manufacturing sector, which was directly
                                                                      hit by the global economic crisis due to the weakness of demand, increased the most, followed by the
                                                                      service sector. Moreover, expenditure on GDP increased by 2.7% Q-o-Q, the largest rise since 2Q
                    Source : Colliers International Korea Research,
                         Based on Seoul Top 110 Office Buldings
                                                                      2000, due to the recovering efforts of the real economy both by the government and the private sector
                                                                      based on the improvement in construction industry and facilities investments.
  MarKet inDeX
  rent, Vacancy, capital Value                                        Despite remarkable GDP growth in 1Q 2010, the CD rate remained at the 2% level, prompting a dis-
                                                                      pute on an ‘Exit Strategy’ as to whether to increase the benchmark rate. Some economic experts are
                                               (3Q 2006 = 100)
 300                                                                  voicing out worries about side effects from rapid inflation by oversupply of liquidity from domestic low
 250                                                                  benchmark rates and foreign capital based on the low-interest policy of the U.S. and other western
 200                                                                  countries. Exchange rate, which increased to 1,415.22 in 1Q 2009, gradually fell to 1,144.08 in 1Q
 150                                                                  2010. Unemployment rate, despite the recovery in the economy, increased to 4.7% in 1Q 2010, from
 100                                                                  3.3% in 4Q 2009, as companies still delayed new recruitments compared with previous years.
                                                                      Conflicting opinions on adopting an ‘Exit Strategy’ were based on the excellent performance in 1Q
                                                                      2010, so market participants are carefully watching the decision of the Korean government as to when
                                                                      and how to amend the low-interest rate policy adopted to stimulate Korea’s economy since 1Q 2009.
          Rental           Vacancy             Capital Value

                   Source : Colliers International Korea Research

                                                                      Net monthly rentals of Seoul Grade A office market fell slightly, to KRW22,822 per sq m in 1Q 2010,
                                                                      due to the relatively large fall in rental rates in the CBD area of -1.4%. In contrast to the typical upward
                                                                      trend in previous years, net monthly rentals have fluctuated within a narrow range since 3Q 2009, due
                                                                      to the weakness of office demand in the economic slowdown. Although overall office demand has sub-
                                                                      sided, net monthly rentals did not show a large decrease compared to Tokyo and the Shanghai Grade
                                                                      A office market. Decrement in net effective monthly rentals was larger to that in net monthly rental,
                                                                      due to the various incentives offered. Coming up to the renewal period for leasing contracts from 4Q
                                                                      2009 and 1Q 2010, most landlords decided to freeze their asking monthly rental prices, providing flex-
                                                                      ible rent-free periods instead of dropping asking monthly rentals.

colliers international Korea
    office snapshot | 1st quarter | 2010 | office Market

                                                                                seoUl GraDe a oFFice aVeraGe Monthly net rent (KrW/ m2)
                                                                                                          *                                                                        2Q 2009
                                                                                                 1Q 2008                    3Q 2008                   1Q 2009                                                 3Q 2009                   4Q 2009                    1Q 2010

                                                                                 overall           22,988                    22,225                     22,590                      22,951                      22,643                   22,920                     22,822

                                                                                 change(%)                       n /a                       1.6%                         1.6%                      -1.3%                    1.2%                        -0.4%

                                                                                   CBD             26,519                    25,211                     26,348                      27,499                      26,547                   26,842                      26,460

                                                                                 Change(%)                       N/A                        4.5%                         4.4%                      -3.5%                    1.1%                        -1.4%

                                                                                   GBD             24,116                    23,323                     22,760                      22,617                      22,695                   22,945                      23,117

                                                                                 Change(%)                       N/A                       -2.4%                         -0.6%                     0.3%                     1.1%                        0.7%

                                                                                   YBD             17,165                    16,779                     17,353                      17,331                      17,368                   17,655                      17,578

                                                                                 Change(%)                       N/A                        3.4%                         -0.1%                     0.2%                     1.7%                        -0.4%

                                                                               * Note : Survey pool was increased to Top 110 Bldgs from Top 70 Bldgs starting 3Q 2008.                                                             Source : Colliers International Korea Research

                                                                               By major business districts, the CBD was the most affected, due to new supply of Seoul Square and
                                                                               the economic ups and downs. Despite rapid stabilization of the occupancy rate of Seoul Square in the
                                                                               current economic situation, the continuous new supply in the CBD area is expected to surpass overall
                                                                               demand in the next few quarters. Monthly rentals in GBD and YBD areas stayed calm compared to
                                                                               fluctuations in the CBD area, with changes of 0.7% Q-o-Q and -0.4% Q-o-Q, respectively. In the GBD
                                                                               area, current rental and vacancy rates have not seen a major change despite the new supplies with total
                                                                               GFA of 156,299 sq m composing of grade A and B office buildings since 3Q 2009. However, adjust-
                                                                               ments are expected to take place in 2Q 2010. Large quantum of new supply of Grade A office in the
                                                                               CBD area will be the major determining factor, in turn to the overall Seoul Grade A office market in
                                                                               1Q 2010.

           Major neW sUPPly
                                                                               Average vacancy rate of Seoul Grade A office market stabilized at 4.25% in 1Q 2010, from 4.31% in
District     Building                     Date        Grade       GFA (m²)
                                                                               4Q 2009. Signs of economic recovery were observed in 1Q 2010, with the smaller decrement in av-
                                                                               erage vacancy rate. The vacancy rate in the GBD area fell to 3.21% in 1Q 2010, while the vacancy
            Ferrum Tower
                                                        A          55,692      rate in the CBD area rapidly increased to 6.46%, because new vacancy space increased faster than
                                          2Q                                   recovery in demand, thanks to the new supply of Seoul Square and office relocations towards the
            Center 1                                    A         167,442
                                         2010                                  DMC and Yeongduengpo area. Vacancy rate of STX-Namsan tower, for example, rapidly increased
CBD         New LG Bldg.
                                                        A          51,265      to 24.32% in 1Q 2010, while Olive Tower and Gateway Tower were recovered only partially from
                                                                               the huge vacancy in 4Q 2009.
            Jongro Place                                A          45,733

                                          4Q                                    seoUl GraDe a oFFice Vacancy rate ( % )
            Project Central
                                                        A         111,108                                                                                                                                                      The vacancy rate in
            Samsung Life                  2Q
                                                                                                   1Q 2008         3Q 2008          1Q 2009          2Q 2009             3Q 2009        4Q 2009            1Q 2010             the GBD area fell to
                                                        B          30,647
            Insurance                    2010                                    overall            0.67%            0.57%            1.11%           3.13%              4.30%            4.31%            4.25%               3.21% in 1Q 2010,
            Baroseum 3rd Bldg.
                                                        B          28,205          CBD              0.80%            0.36%            0.79%           2.34%              4.60%            5.83%            6.46%               while the vacancy rate
                                                                                   GBD              1.10%            0.82%            1.26%           4.31%              4.39%            4.17%            3.21%
                                                                                                                                                                                                                               in CBD area rapidly
            Irae Building
                                                        B          31,074                                                                                                                                                      increased to 6.46%
                                                                                   YBD              0.12%            0.53%            1.29%           2.55%              3.65%            1.99%            2.26%
 YBD        IFC Seoul 1                                 A          88,160                                                                                                  Source : Colliers International Korea Research

            Parc 1 (Tower 1)
                                                        A         151,517      In 1Q 2010, there were many leasing transactions, owing to the renewal season. In the CBD area,
                              Source : Colliers International Korea Research   Olive Tower, which recorded more than 40% vacancy rate in 4Q 2009, was occupied by Hyundai Oil
                                                                               Bank (5,256 sq m) and Samsung F&M (4,350 sq m), and Gateway Tower, which also showed large
                                                                               vacancy rate in 4Q 2009, was occupied by Air Product (1,630 sq m). Seoul Square, supplied in 4Q
                                                                               2009, was leased by LG Electrics (16,000 sq m), German Cultural Centre (3,800 sq m) and Korea
                                                                               Open National University (5,450 sq m). In the GBD area, Hana Bank relocated in Lotte Castle
                                                                               Plaza at Jamsil Station, taking up 14,000 sq m; Kyobo Life Insurance took up Golden Tower (1,490
                                                                               sq m); Thinkwaresys occupied Trust Tower with 8,722 sq m; and GS E&C occupied GS Tower with
                                                                               3,300 sq m. In the YBD area, Kiwoom Finance Centre was occupied by Hyundai Securities (3,648
                                                                               sq m) and Dongyang Securities Building was occupied by Woori Asset Management (4,975 sq m).
                                                                               Other tenant movements were also observed in the BBD and DMC areas. As high-quality prime of-
                                                                               fice buildings are to be supplied in the CBD area, more relocations by tenant occupiers are expected
                                                                               until the end of 2010.

                                                                               caPital ValUe
                                                                               In 1Q 2010, there were seven sales transactions in Seoul major business district, totalling KRW849.4
                                                                               billion, of which total sales in the CBD area accounted for 80%. Sales transaction in the GBD area,

colliers international Korea
                                                                                                                                            office snapshot | 1st quarter | 2010 | office Market

which had shown the most energetic sales transactions during 2009, saw a slowdown in
transactions, since most Grade A office buildings on sale had been sold. Also, investment
in Grade A office buildings, which led the recovery of capital value in Seoul Grade A office                                                             480 oFFices in 61 coUntries on 6
market, based on relatively lower prices than usual in the economic slowdown, seemed to be                                                               continents
awaiting another chance to acquire quality assets at the right time. In fact, total investment
by domestic individuals and institutions in 1Q 2010 has fallen compared with the average                                                                 Usa 135
in 2009.                                                                                                                                                 canada 39
                                                                                                                                                         latin america 17
 seoUl GraDe a oFFice caPital ValUe* (KrW thoUsanDs / m2 )                                                                     Investments in
                       3Q 2008        4Q 2008        1Q 2009        2Q 2009       3Q 2009        4Q 2009        1Q 2010        Grade A office            asia 26
      overall            5,550          3,522          4,406          3,980         4,990          4,472          5,0 0 3      buildings seemed to       anZ 168
 QoQ Change(%)           19.04%        -36.53%        25.09%         -9.68%         25.38%       -10.37%         11.86%        be awaiting another       eMea 95
       CBD                4,428         3,668          4,287          4,124         4,117          4,063          5,2 9 1      chance to acquire
                                                                                                                                                         $15.4 billion in annual transaction volume
       GBD                6,325         2,942          3,525          4,306         4,728          5,206          4,6 7 9      quality assets at
       YBD                4,689           N/A            N/A          3,656         4,008          4,044            N/A        the right time.           223.0 million sq m under management
* Note : Based on more than 10,000 sq m GFA and KRW 10.0 billion sales price transaction
                                                                              Source : Colliers International Korea Research                             over 15,052 Professionals
In the CBD area, Samsung Headquarters Building was sold to Samsung Life Insurance by
Samsung Electronics for a total of KRW504.8 billion, at KRW6.03 million per sq m; and
Jungdong Building was acquired by Samsung Investments for a total of KRW178.0 billion,                                                                   contact inForMation
at KRW 5.29 million per sqm. Average sales price in CBD area in 1Q 2010 increased almost
30% compared to its value in 4Q 2009. In the GBD area, there were four sales transactions
                                                                                                                                                         colliers international Korea :
of office buildings, mainly Grade B buildings, not abutting the Teheran Valley, and with a
relatively lower GFA, so that average sales price in GBD area in 1Q 2010 fell to KRW4.68
                                                                                                                                                         10F Korea Tourism Organization Bldg.,
million per sq m. In the YBD area, Jangdeok Building (Grade B) was sold to Yeouido Sun-                                                                  10 Da-dong, Jung-gu, Seoul, Korea 100-180
bokeum Church at a lower price than usual. Allianz Life Insurance sold Allianz Bundang
Building for KRW32.7 billion, at KRW2,27 million per sq m. Esquire Building, in Seongsu                                                                  Tel: 82-2-6740-2000
district, in which the development high-rise office and mixed-use buildings are expected,                                                                Fax: 82-2-318-2015
was sold to a famous sports star for KRW29.3 billion, at KRW2.94 million per sq m.
                                                                                                                                                         George McKay
In addition, transactions for     seoUl GraDe a oFFice caPital ValUe trenD(1q 2004 - 1q 2010)                                                            Representative Director
urban regeneration projects by   KRW Thousands/                                                                                                
domestic companies and in-        7,000

stitutions for self-occupation                                                                                                                           jay yun
and investments centering on                                                                                                                             Senior Director & General Manager
the CBD area increased at the     5,000

beginning of 2010. KT, for ex-    4,000                                                                                                                  young cho
ample, acquired Cheongjin 1                                                                                                                              Manager, Consultancy & Valuation Division
redevelopment district from       3,000
GS construction, and Poong-       2,000
san, which has occupied Keu-
kdong Building for more than                                                                                                                             reproduction of the contents of this publication is
                                                                                                                                                         prohibited without gaining prior permission from colliers
20 years, acquired Maporo 4-1         0                                                                                                                  international Korea.
redevelopment site for the of-
                                                                                                                                                         this report and other research materials may be found on
fice building, a development                                                                                                                             our website at ques-
                                                 CBD     GBD       YBD             Overall
of 36,533 sq m GFA, located                                           Source : Colliers International Korea Research
                                                                                                                                                         tions related to information herein should be directed to
                                                                                                                                                         the research Department at the number indicated above.
2 km from the CBD area, for a                                                                                                                            this document has been prepared by colliers international
total of KRW95.0 billion. In terms of the GBD area, not only Grade A buildings along                                                                     Korea for advertising and general information only. colliers
                                                                                                                                                         international Korea makes no guarantees, representations
Teheran Valley, but also Grade B buildings near new station of Subway line 9, will be in                                                                 or warranties of any kind, expressed or implied, regarding
                                                                                                                                                         the information including, but not limited to, warranties
constant focus.                                                                                                                                          of content, accuracy and reliability. any interested party
                                                                                                                                                         should undertake their own inquiries as to the accuracy
Considering that investment capital based on the low-interest policy has positively affected                                                             of the information. colliers international Korea excludes
the recovery of capital value of office buildings, the rapid growth of capital value recorded                                                            unequivocally all inferred or implied terms, conditions and
                                                                                                                                                         warranties arising out of this document and excludes all
in 2009 will be slowed in 2010, due to the exhaustion of office buildings for sale and the                                                               liability for loss and damages arising there from. colliers
                                                                                                                                                         international is a worldwide affiliation of independently
expected rise of the benchmark rate by the Korean government. However, as one foreign                                                                    owned and operated companies.
institutional investor currently announced, the Seoul office market is of investment-grade,
with relatively high investment yield, so Seoul Grade A office market will be a constant                                                                 For more information about this report
interest for foreign capital in 2010. n                                                                                                        
                                                                                          office snapshot | 1st quarter | 2010 | office Market

     colliers international                                                        coMMercial leasinG
                                                                                   •	   Corporate Advisory
     COLLIERS INTERNATIONAL is global partnership of real es-
     tate companies with unparalleled knowledge and expertise across               •	   Tenant Representation
     the full range of property services The organisation’s services.
     organisation’s 11,000 employees span the world. 302 branches                  sales anD inDUstrial
     all over the world are offering high-quality services to meet the             •	   Acquisition and Disposal
     clients’ needs.                                                               •	   Marketing and Sales Campaigns
                                                                                   •	   Project Analysis
     colliers in Korea
                                                                                   •	   Problem Asset Disposal
     Colliers has developed a significant market position in the real              •	   Project Marketing
     estate market in Korea. Our platform can deliver acquisition,
     disposal, leasing and valuation & advisory for different projects             consUltancy anD ValUation
     throughout Korea. Colliers ensures that a proven and transparent              •	   Valuation Reports to International Standards
     process is implemented, coupled with our market research which
                                                                                   •	   Feasibility Studies
     has been developed at a fundamental level that ensures all real
                                                                                   •	   Highest and Best Use Analysis
     estate decisions are made with a full and clear understanding of
     the market.                                                                   •	   Rent Reviews
                                                                                   •	   Research and Consultancy
     a total solUtion ProViDer                                                     •	   Cost Benchmarking
     Colliers international Korea offers customised property services
     through our specialised core service lines. Our professional team             sales anD Project ManaGeMent
     is highly experienced and knowledgeable about the property mar-               •	   Strategic workplace consultancy- organizational briefing
     ket and the ever changing economic factors which influence it.                     and needs analysis
                                                                                   •	   Workplace interior design and documentation
                                                                                   •	   Space use assessment and strategic facilities planning
                                                                                   •	   Design. Build. Project Management

                                                                                   hosPitality, retail anD leisUre sectors
                                                                                   •	   Services range from valuation and due diligence exercises,
                                                                                        market research and feasibility studies to advisory and ne-
                                                                                        gotiating the terms of management counteracts.
                                                                                        shoPPinG centers
                                                                                   •	   Services include market research, feasibility studies, po-
     We commit to our clients’ needs by delivering service excellence                   sitioning and repositioning studies, market share and in-
     with application of best professional practices from the Asia Pa-                  come projections, merchandising and tenant mix studies.
     cific region. Our core service lines in Korea are:

     colliers international Korea
     10F Korea Tourism Organization Bldg., 10 Da-dong, Jung-gu, Seoul, Korea 100-180
     Tel: 82-2-6740-2000    Fax: 82-2-318-2015

To top