Transaction slump despite supply boom deepens divide in Seoul’s office market

A clear transaction gap emerges ahead of supply expansion
Demand concentrates on prime offices defined by location and quality
Polarization intensifies adjustment pressure on non-core assets

Toward the end of last year, transaction activity in Seoul’s office market contracted sharply, signaling a deterioration in market sentiment. Even as large-scale new supply is scheduled to come online, companies have become far more selective in their purchase and leasing decisions, prompting analysis that the phase in which all assets were treated equally has passed. As market participants focus increasingly on prime offices and other high-grade properties, the deepening polarization is expected to provide an important clue to the future direction of the broader real estate market.

Transaction value down 72.6% in a single month

According to commercial real estate services firm Budongsan Planet on the 13th, total transaction value in Seoul’s office sales market in November last year fell to 178.6 million dollars, down 72.6% from 652.0 million dollars in the previous month. The number of transactions rose slightly from eight to eleven, but overall volume shrank sharply as deals were concentrated in small- and mid-sized assets. The most expensive transaction involved Premier Place in Mugyo-dong, Jung District, which changed hands for 113.6 million dollars, followed by Yangyu Building in Daechi-dong, Gangnam District, at 22.4 million dollars, and the B&M Building in Nonhyeon-dong, Gangnam District, at 13.5 million dollars.

The office market also failed to escape the downturn. Over the same period, transaction volume fell 42.2%, from 128 cases to 74, while transaction value plunged 94.7%, from 345.6 million dollars to 18.4 million dollars. Even compared with November 2024, when transaction volume stood at 236 cases and value at 93.2 million dollars, declines of 68.6% and 80.3%, respectively, were recorded. By district, transaction value in the central business district (CBD) posted the steepest drop at 76.8%, while the Gangnam business district (GBD) showed relatively greater resilience. A Budongsan Planet official said that “even in an uncertain market environment, Gangnam remained comparatively stable, with office transaction value increasing more than threefold month on month.”

Despite the transaction freeze, supply continues to expand. According to CBRE Korea, a total of 4.71 million square meters of new office space is expected to be supplied across Seoul’s three major business districts—the CBD, GBD, and Yeouido business district (YBD)—by 2031. This represents an increase of more than 45% from the current 10.57 million square meters. While some supply schedules may be delayed, the overall expansion trend remains unchanged. Geographic concentration is also pronounced, with 3.89 million square meters, or 83% of new supply, slated for the CBD. As a result, the CBD office market is projected to grow to twice the size of Gangnam and three times that of Yeouido.

As a supply surge looms following a period of transaction stagnation, shifts in demand have emerged as a key point of focus. In November last year, the average vacancy rate for Seoul office buildings rose to 3.60%, up 0.09 percentage points from the previous month. While vacancy in Gangnam edged down slightly, the CBD vacancy rate returned to the 4% range, pushing up the overall figure. Notably, tenant costs continued to rise despite increasing vacancies. Net occupancy cost, which reflects the actual expense per usable area including rent and maintenance fees, climbed to 137.8 dollars, up about 0.2 dollars from the prior month.

Prime assets in core locations remain buoyant

Prime offices, however, have largely sidestepped the broader transaction drought. Last year, vacancy in domestic prime offices stood at just 0.85%, effectively indicating near-full occupancy and well below the 3.29% vacancy rate recorded for Grade A offices. This gap points to widening demand disparities by asset grade even within the same districts. Rather than a complete market freeze, the data suggest that investor and tenant criteria have narrowed sharply.

Preference for prime offices is also evident in leasing demand. Companies have prioritized relative conditions such as location and surrounding environment over headline figures like leased floor area. Demand has concentrated on assets that meet strict standards for accessibility and infrastructure within the three major business districts. Representative examples include Finance Center and Parnas Tower in Gangnam, D Tower and Centropolis in the CBD, and IFC Seoul in Yeouido. By contrast, aging buildings or assets in non-core locations, even within the same districts, have faced prolonged transaction gaps.

Changes in corporate behavior have further reinforced this concentration. As office attendance accelerated after the pandemic, companies increasingly began to view office space not merely as a workplace but as core operational infrastructure. In an environment where talent acquisition and retention matter, office quality has become part of a firm’s competitiveness. This trend has been especially pronounced among large and fast-growing firms. Last year, KakaoBank acquired Pangyo Tech One Tower for about 1.29 billion dollars, marking the largest single-office transaction on record.

Samsung Group also repurchased its Seocho office building in Gangnam in 2024, while cryptocurrency exchange Bithumb acquired Gangnam N Tower after a prolonged search. Hyundai Motor Group purchased Tiger 318 Scale Tower near Gangnam Station over a two-year period and relocated its development organization there. All of these cases reflect decisions concentrated on top-tier assets in core locations. The pattern suggests that the key criterion in office selection has moved beyond cost efficiency toward the extent to which an asset meets employees’ expectations for work satisfaction. Behind the broader transaction slowdown lies a trend of demand concentrating on assets that meet specific conditions.

“Selection and exclusion” take hold

Experts broadly agree that this polarization will intensify. In a report titled “2026 Outlook for the Domestic Commercial Real Estate Market” published on the 11th, Koramco Research and Strategy said that South Korea’s commercial real estate market would continue along a path of extreme polarization centered on large-scale assets in prime locations. The report noted that more than 70% of commercial real estate transactions last year occurred in the office sector, with roughly 80% concentrated in large assets, indicating that the market has already been restructured around scale. While net absorption of medium- to large-sized space continues, movement in small offices has clearly slowed.

Kim Yeol-mae, head of Koramco’s research and strategy unit, said that “the key keyword running through the asset market this year is extreme polarization,” adding that “amid strength centered on large and prime assets, investors need to approach the market with a more granular assessment of sector cycles and location-specific risks.” She noted that while external conditions are beyond control, strategies can be adjusted, and that data-driven decision-making would be critical to turning volatility into opportunity.

Real estate consulting firm R Square offered a similar view. According to R Square, the office sales index for Seoul and the Bundang area reached 504.3 points in the third quarter of last year, more than five times the baseline of 100 set in the first quarter of 2001. Over the same period, the sales index for knowledge industry centers fell to 192.2 points, down 1.5% from the previous quarter and 6.8% year on year, and about 25% below its peak in the second quarter of 2022. The divergent price trajectories of offices and knowledge industry centers under the same interest-rate environment and macroeconomic conditions underscore the strengthening selection pressure within asset classes themselves.