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Seoul real estate

Downtown Seoul office building prices rise to record high

May 18, 2021 (Gmt+09:00)

The Pinnacle Yeoksam in Gangnam District
The Pinnacle Yeoksam in Gangnam District
Office building prices in downtown Seoul set a fresh record high this month, with the highest price of one pyeong, or 3.3 square meters, surpassing 40 million won ($35 million) for the first time in the country.

The Pinnacle Yeoksam tower, measuring about 14,456 square meters, or 4,380 pyeong in the Gangnam District, is poised to become the most expensive commercial building in South Korea in terms of the base Korean unit of area, or pyeong. It will also mark the first office transaction in the country, for which the per-pyeong price exceeded 40 million won.

Seoul-based IGIS Asset Management Co. was picked as the preferred buyer of the Pinnacle Yeoksam earlier this month with the bidding price of 175.6 billion won, according to investment banking sources on May 17.

Back in 2018, the sale of the Asset tower, Samsung C&T Corp.'s former Seoul office, was the first Korean office transaction for which the pyeong price topped 30 million won. The office located in Seocho District, near Gangnam District, was sold to a consortium of NH Investment & Securities Co. and Koramco for around 750 billion won in 2018.
O2 Tower in Yeouido
O2 Tower in Yeouido

Before being named as the preferred buyer of the Pinnacle Yeoksam, IGIS had posted about a 50% return from the divestment of the 02 Tower in central Seoul, formerly known as HP Building, in three years. It renovated the two-decades-old building in a value-added strategy.

Foreign money inflows, in particular from China, have been driving the liquidity-driven commercial real estate market further higher in Seoul. China's strict restrictions on the construction of new buildings since last year have accelerated their money inflow into the Korean property market.

Last year, non-residents' buying of office buildings in South Korea soared by 79% year-on-year to 3.4 trillion won, according to Real Capital Analytics (RCA).

Further, major Korean pension and savings funds diverted their offshore investment money into domestic deals because they were unable to proceed with overseas property investments given the due diligence difficulties. Their participation has fueled competition and lowered returns from domestic real estate.

Recent Seoul office transactions in central business districts

Building name Area Selling price  Price per pyeong Seller Buyer When
Pinnacle Yeoksam Gangnam 175.6 bn won 40 mn won Pebble Stone Asset IGIS Asset May 2021
Donggung Richwell Tower Gangnam 200 bn won 36 mn won N/A Smilegate Mar. 2021
31 Building Jongno  442 bn won 35 mn won IGIS Asset NH Amundi Asset Management Apr. 2021
Samsung Life office building Yeouido  N/A 22 mn won N/A  BNK Asset Management Dec. 2020
O2 Tower Yeouido 336 bn won 24 mn won IGIS Asset Samsung SRA Asset and NH Investment & Securities Feb. 2021
Hyudnai Merchant & Fire Insurance office Gangnam N/A 34 mn won Hyudnai Merchant & Fire Insurance KOREIT July 2020

31 Building in Jongno District
31 Building in Jongno District

In the first quarter of this year, commercial real estate transactions in Seoul were down 26% year-on-year to $2.2 billion. But it remained the second most active Asian market after Tokyo, according to RCA.


Before the Pinnacle Yeoksam tower deal, the most expensive office transaction was Donggung Richwell Tower in Gangnam District which sold for 36 million won per pyeong to Smilegate in March this year. The Korean video game developer is using the property as its head office. 

Despite the record-setting price, demand remains strong.

"We have no intention to sell our office at all, but we are receiving a series of offers to buy it," said an official of K-Tower in Samseong-dong, Gangnam District.

"Even in the pandemic situation, the Seoul office vacancy rate remains low compared with those in global gateway cities. This helps place Seoul office buildings into the category of safe assets," noted Korean research head of Colliers, a real estate consultancy.

The average vacancy rate in South Korea's large office buildings rose to 9.4% in the first quarter of this year, from 4.04% a year earlier. But real estate analysts attributed the vacancy rate increase to the new construction of high-rise buildings in the central business districts, rather than the impact of the pandemic.
Samsung C&T's former Seocho office in Seocho District
Samsung C&T's former Seocho office in Seocho District

Some analysts predict the Seoul office selling price to top 50 million won per 3.3 square meters, or pyeong, within the next two to three years, adding that their price is still low relative to global cities.

Several years ago, 3.3 square meters of large office buildings in Hong Kong, Tokyo and New York and San Francisco in the US sold for  250 million won, 200 million won and 250 million won, respectively, said Chung Kimin, JLL's head of international capital in Korea.

"Seoul office building prices are less than one-third of them and thus, may look attractive for bargain-hunting," Chung added.

The rising presence of real estate trust investments (REITs) in the domestic office property market has reduced office supply available for trade. In search of new targets, institutional investors are now looking beyond Grade A buildings to small and medium-sized ones in Gangnam District for value-added strategy.

But the domestic office property market may not see as much money inflow as it enjoyed last year because Korean pension funds are resuming overseas investments in search of higher yields. Possible interest rate hikes later this year could cool their interest in the property market as well. 

"Higher office purchase prices pulled their cap rate to the higher end of 2% from the low end of 3%," said a real estate investment firm.

"Should interest rates go up and the cap rate drop further, investors will turn their eyes to other investment assets," he told Market Insight, the capital news outlet of The Korea Economic Daily. A cap rate refers to the property's net operating income divided by their market value.

By A-Young Yoon

Yeonhee Kim edited this article.

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