"Our rent jumped significantly when we renewed the lease, but there was nothing we could do. Even if you search every office building in Yeouido right now, there's nowhere suitable to move in," said an official at a company based in Parc1 Tower in Yeouido.
Seoul's Yeouido office market is heating up as the securities and asset management industries rapidly expand on the back of a booming KOSPI. Redevelopment of major buildings has further reduced existing office supply, creating what analysts describe as a shortage.
According to the commercial real estate industry on Wednesday, one financial firm based at IFC, a landmark building in Yeouido, has recently had to disperse its workforce across multiple locations after failing to secure additional space amid headcount growth. Moving into a larger space would require about a year on the waiting list. The industry estimates the effective rent at IFC, which currently has no large-office vacancies, at around 400,000 won per 3.3 square meters of net leasable area. The effective rent reflects various conditions including rent-free periods and rent reductions during interior construction.
Despite rising rents, Yeouido remains relatively affordable compared with other major Seoul districts. As of the first quarter of this year, the average effective rent for Prime-grade offices in Yeouido stood at around 110,000 won per 3.3 square meters of gross floor area including common areas, below the Seoul average of 127,000 won. "Yeouido office supply is expected to remain limited through 2029, when current redevelopment projects are projected to be completed," said Jung Hye-jin, a research analyst at RSQUARE. "With rent-free periods shrinking, effective rents are likely to continue rising."
"Yeouido sees limited new office supply, and demand doesn't fluctuate much," said Jo Yong-ho, commercial real estate brokerage team leader at MATE PLUS. "Properties that meet a certain standard in terms of price and building condition tend to be absorbed quite quickly." Indeed, a leasing listing at the Yeouido Finance Building that appeared a few weeks ago quickly found a tenant.
The market attributes the expanding demand for Yeouido offices to the securities industry boom driven by the recent surge in KOSPI trading volume. As securities firms and asset management companies continue to expand their workforce and organizations, competition to secure prime offices is intensifying.
According to the Korea Real Estate Board, the large-office vacancy rate in the Yeouido-Mapo Business District (YBD) stood at 2.3% in the first quarter of this year. This contrasts sharply with the Gangnam Business District (GBD), where the large-office vacancy rate rose significantly to 3.8% from 2.4% in the previous quarter. The current sentiment marks a dramatic shift from when IFC and Parc1 opened in 2012 and 2020 respectively, when Yeouido's vacancy rate exceeded 10%. "Among Seoul's three major business districts, Yeouido has seen the largest improvement in the Prime-grade office vacancy rate," said an official at global commercial real estate firm CBRE. "Leasing activity by financial firms has been active around IFC and FKI Tower, and the absorption of vacancies at One Sentinel, formerly Shinhan Investment Tower, has also had an impact."
Meanwhile, new large-office supply in the Yeouido district has virtually dried up. Since Brighten Yeouido in 2023 and TP Tower in 2024, there has been almost no major new supply. At the same time, major offices including the Korea Fire Protection Association building and Kiwoom Finance Square have entered redevelopment, prompting existing tenants to relocate to other buildings. The expiration this year of five-year lease contracts signed during the pandemic, when the real estate market was struggling, has also fueled relocation demand.
