Investors Shift Focus to Prime office Districts
Seoul’s office market is entering a new phase as a wave of new downtown office completions pushes vacancy rates to their highest level in more than four years, prompting institutional investors to become increasingly selective even as rents continue to climb, according to a new report from JLL.
The real estate services firm said the capital’s Grade A office vacancy rate rose to 6.6% in the second quarter, surpassing the market’s estimated 5% equilibrium level for the first time since early 2022. The increase was driven largely by the completion of two major office developments in Seoul’s central business district (CBD), which entered the market with significant unoccupied space.
Despite the rise in vacancies, tenant demand remained resilient. Grade A offices recorded more than 166,000 square feet of net absorption during the quarter, underscoring continued leasing activity even as supply expanded.
The sharpest shift occurred in the CBD, where vacancy climbed to 12.3%, reflecting the delivery of more than 2 million square feet of new office inventory, including the newly completed G1 Seoul and Rene Square developments. While the influx has intensified near-term oversupply concerns, JLL expects vacancy to moderate as pre-leased buildings reach full occupancy over the coming quarters.
The market’s other major business districts continued to demonstrate stronger fundamentals.
Yeouido posted modestly higher vacancy after recording negative net absorption during the quarter, but analysts expect the financial district to remain well supported because only limited new office inventory is scheduled to come to market over the next five years. Gangnam remained Seoul’s tightest office market, with vacancy holding below 1% as leasing demand continued to outpace available supply.
The divergent performance across Seoul’s office districts is increasingly influencing investor strategy.
Although South Korea’s office investment market generated roughly KRW 7.4 trillion ($5.1 billion) in transaction volume during the first half of 2026, investors are becoming more cautious following the Bank of Korea’s July interest-rate increase and expectations that borrowing costs could rise further before year-end.
Major office transactions completed during the first six months of the year included Hana Investment & Securities Building, G-Tower, Eulji Twin Tower West Tower, and E-mart Tower, supported by renewed allocations from domestic institutional investors.
Even as vacancy expanded, pricing power remained intact. Average effective Grade A office rents increased 2.2% from the previous quarter and 4.9% from a year earlier, with Gangnam continuing to command Seoul’s highest rents, closely followed by the CBD. Yeouido remained the city’s most affordable major office district.
“The Seoul office market has entered a new phase with the full-scale entry into a new supply cycle in the CBD,” said Kee Hoon Lee, head of capital markets at JLL Korea. “As regional supply imbalance intensifies, the CBD faces upward pressure on vacancy rates while Yeouido and Gangnam are positioned for stable growth, which will further strengthen investors’ selective approach.”
The report suggests Seoul’s office market is transitioning from several years of broad-based landlord strength toward a more segmented environment, where asset quality, location and leasing fundamentals are likely to play an increasingly important role in determining investment performance.
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