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The View | Why Seoul stands out among Asia’s top property markets
South Korea’s capital is in an enviable position as its office sector remains strong and its living sector holds considerable promise
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Since the Covid-19 pandemic erupted in 2020, two themes have pervaded global commercial property investment markets. The first is concerns about demand for office space as the shift to remote work and the flight to high-quality buildings undermine the value of many offices, particularly in the United States.
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The average global office vacancy rate stood at 17 per cent at the end of the second quarter of this year, up from 10 per cent before the pandemic struck. Moreover, the office sector’s share of global investment transaction volumes fell from nearly 35 per cent in 2019 to 22 per cent last year, according to JLL.
The second theme is the growing appeal of the living sector, especially the multifamily, or build-to-rent, market. The combination of demographic and lifestyle changes, a private rented sector dominated by individual landlords and investors’ appetite for resilient properties with stable cash flows has served as a catalyst for the institutionalisation of rental housing.
The scope for growth is greatest in Asia. The living sector in the region has accounted for just 6 per cent of investment activity since 2019 compared with 44 per cent in the United States, according to CBRE data.
In Seoul, offices and rental housing are major themes in the real estate industry. In the office sector, Seoul has bucked the global trend in spectacular fashion. Even among the leading Asian markets which have faced less disruption from the pandemic-induced shift to hybrid working, Seoul stands out from the rest.
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While the average vacancy rate for prime offices in the main markets across the Asia-Pacific region was close to 15 per cent in the second quarter, Seoul’s was a shockingly low 1.5 per cent, by far the lowest in the region, according to Knight Frank. In annualised terms, effective rents – which take into account any concessions or incentives offered by landlords – for grade A offices grew a staggering 15.4 per cent in the second quarter, CBRE notes.
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