Outlook 2023 South Korea

SOUTH KOREA

KEY MESSAGES BRISBANE SEOUL

SUPPLY

DEMAND

RENTS

KEY OUTLOOK

 After the extremely low supply in 2022, several projects are scheduled in 2023, but pre leasing activity is expected to contain the impact of the new supply on vacancy.  Several large-scale projects are taking shape, with completion expected after 2025.

 Tenant demand remained strong in 2022, and the vacancy rate recorded was unprecedentedly low.  Limited supply has not kept pace with demand, resulting in strong competition between tenants.  Due to uncertainties in the global economy, the growth of IT companies and start-ups

 Unprecedentedly low vacancy rate and high inflation have driven rapid rent growth.  Rents are expected to stabilize after 2023 as new supply enters the market.

 The vacancy rate, which has decreased at a rapid pace in 2022, is expected to rise gradually due to the looming global economic slowdown.

(which have led the recent decline in vacancy rates) is expected to slow down, therefore office demand is forecast to decrease.

SEOUL

NEW SUPPLY

NEW SUPPLY (SQ M)

900,000

 There is limited new supply in 2022, before more projects complete in 2023.  In YBD (Yeouido Business District), two projects are currently under construction and are expected to complete in the second half of 2023. Pre-leasing activity is expected to contain the impact of the new supply on vacancy.

FORECAST

800,000

700,000

600,000

500,000

400,000

300,000

200,000

100,000

0

2020

2021

2022F

2023F

2024F

2025F

2026F

Source: Cushman & Wakefield

SEOUL

DEMAND & VACANCY

NET ABSORPTION (SQM) AND VACANCY RATE (%)

FORECAST

700,000

9.0%

 Tenant demand remained strong in 2022, driven by IT companies and start-ups, driven vacancy down to unprecedented lows.  Net absorption is forecast to slow in 2023 due to uncertainties in the global economy.  As new supply enters the market,, vacancy is expected to increase gradually.

600,000

8.0%

500,000

7.0%

400,000

6.0%

300,000

5.0%

200,000

4.0%

100,000

3.0%

-

2.0%

-100,000

1.0%

-200,000

-300,000

0.0%

2020

2021

2022F 2023F 2024F 2025F 2026F Net Absorption Vacancy Rate

Source: Cushman & Wakefield

SEOUL

RENT GROWTH

RENT (KRW/SQM/YR) AND RENT GROWTH (% PER ANNUM)

FORECAST

37,000

6.0%

 Rent growth is expected reach 5% in 2022 in line with low vacancy rate and high inflation.  Rent-free periods have been reduced, leading to the rise of effective rents.  After 2023, rent growth will likely slow as new supply enters the market and tenant demand softens.

36,000

5.0%

35,000

34,000

4.0%

33,000

32,000

3.0%

31,000

2.0%

30,000

29,000

1.0%

28,000

27,000

0.0%

2020

2021

2022F 2023F 2024F 2025F 2026F

Rent (KRW/SQM/YR)

Rent Growth

Source: Cushman & Wakefield

CONTACTS

RESEARCH: Jinwoo Jung​ Head of Research, South Korea jinwoo.jung@cushwake.com LEASING: Ray Kim​ Head of Leasing, South Korea ray.kim@cushwake.com

TENANT REPRESENTATION: YJ Choi​ Head of Tenant Representation, South Korea yj.choi@cushwake.com CAPITAL MARKETS: YK Son Head of Capital Markets, South Korea yk.son@cushwake.com

Asia Pacific Dr Dominic Brown Head of Insight & Analysis, Asia Pacific dominic.brown@cushwake.com

Disclaimer. The information in this material is general in nature and has been created by Cushman & Wakefield for information purposes only. It is not intended to be a complete description of the markets or developments to which it refers. The material uses information obtained from a variety of sources which Cushman & Wakefield believe to be reliable however, it has not verified all or any information and does not represent, warrant or guarantee its accuracy, adequacy or completeness. Any forecasts or other forward looking statements contained in this material may involve significant elements of subjective judgment and assumptions as to future events which may or may not be correct and are beyond the control of Cushman & Wakefield. Cushman & Wakefield is not responsible for any loss suffered as a result of or in relation to the use of this material. To the extent permitted by law, Cushman & Wakefield excludes any liability, including any liability for negligence, for any loss, including indirect or consequential damages arising from or in relation to the use of this material. All expressions of opinion included in this material are subject to change. © 2022 Cushman & Wakefield. All rights reserved.