Office rents climb in Seoul

Photo: Mariusz Kluzniak

Office rents climbed in Seoul during the first few months of 2015, despite take-up falling.

Prime headline rents in the city rose 2.3 per cent in Q1, in the face of low demand and a large increase in stock, thanks to the addition of two new office buildings in the CBD.

A similar trend has occured elsewhere, with a surge in new prime office supply in the major Chinese cities and a cooling economy pushing up vacancy rates. However, Beijing and Shanghai both saw rents decline.

Seoul’s headline figures, though, mask an effective decline in rents, says Knight Frank’s latest report, “due to a significant increase in incentives, with
the rise in headline rents representing an attempt by landlords to maintain a
building’s grade in a slowing market”.

Tokyo, which saw similar rental growth over the period, is a different case entirely. The majority of Marunouchi, the city’s financial district, is owned by Mitsubishi Estate. Its close relationship with a large number of domestic occupiers, combined with the structure of traditional Japanese leases (which prevents significant rental hikes), has held back rental growth to
only 1.9 per cent in a very tight market with little vacancy.

Overall, the Knight Frank Asia-Pacific Prime Office Rental Index rose 1.3 per cent in the first quarter of 2015 and now sits 5.3 per cent above its pre-crisis (Q2 2008) peak, as 13 out of the 19 markets tracked experienced rental growth.

Over the next 12 months, Knight Frank forecasts rents in 14 cities to either remain steady or increase.