What causes the boom in Seoul’s office real estate market
South Korea’s capital city continues to boom in the office real estate market, which began in the fourth quarter of 2020. At that time, transactions in Seoul and its suburbs, Bandung, totaled $3.35 billion. The annual figure reached a record high of $1 billion.
The Korean office market is actively developing. Within 3 years, the total volume of transactions here was fixed at the level of $9.07 billion. A large share of 32.2% belongs to the business centers of Seoul, in second place is Gangnam area with the index of 28.6%, followed by Yeouido, which occupies 14.5%.
Experts say the market rush and increase in demand for office space is related to investors’ desire to invest in stable assets that have high activity at low interest rates.
The pandemic has significantly hit the real economy, which has led to doubts about the profitability of assets that have to do with trade. These include hypermarkets, movie theaters, hotels and others. Such state of affairs has led to increased competition in the segment of office objects, where there are guarantees of stable profit.
Consequently, transaction prices have gone up, which is especially noticeable in Seoul’s three popular office districts. In these parts of the capital, the price rose by 8.6%, and by the beginning of this year was $23,293 per unit.
It should be noted that Seoul is rapidly developing not only the market of office facilities, but also luxury housing. According to analysts’ forecasts, by the end of this year, prices in this segment should increase by 1.6% in 30 major cities around the world, among which the Korean capital is one of the leaders. In addition to this metropolis in the top 3 on the growth of the cost of luxury residential real estate includes Berlin and Sydney.
The growth in demand for this type of objects is due to the increase in general activity on the market after the pandemic, the optimistic mood among investors became clearly visible after the start of vaccination. In addition, the second half of 2020 showed the sustainability of luxury assets, as evidenced by the Savills World Cities Prime Index, which demonstrates the processes in the housing segment. The increase in this index was 0.8 for the metropolitan areas that took part in the study.
According to experts, the current year’s luxury housing market is influenced by the same factors as in the previous period. These include the limited supply and the desire of consumers to increase the area of the apartment or house. Prices in Seoul are expected to increase by 9.9% by the end of 2021. By comparison, in the third and fourth quarters of 2020 the price increase here was 8.6%. Now the market is on an upward trend, and the same processes will continue in the near future.