Released by Cushman & Wakefield Korea, a Global Real Estate Consulting Firm
Analysis of the Logistics, Office, Investment, and Retail Sectors; Office Vacancy Rate at 2.6%
Cushman & Wakefield's Korea office (hereinafter Cushman Korea), a global real estate consulting firm, has released its Q2 2023 commercial real estate market report. The report released this time comprises a total of four market reports covering the office, investment, logistics, and retail sectors, with details as follows.
◇Logistics- In the first half of 2023, the transaction volume of logistics centers in the Seoul metropolitan area recorded KRW 3.2 trillion, a 4% decrease compared to the same period last year; however, the extent of the decline narrowed as six forward-purchase contract deals were closed. The total gross floor area of newly supplied logistics centers was approximately 3.11 million ㎡, with the southern region in particular receiving 1.26 million ㎡—more than four times the average half-yearly supply over the past three years. Amid concerns over cold-storage space, an increasing number of logistics centers are changing their designs to convert cold-storage space into ambient-temperature space.
◇Office- In Q2 2023, the average vacancy rate for Grade A office buildings stood at 2.6%, unchanged from the previous quarter. Rents rose 1.2% quarter-on-quarter and 8.4% year-on-year, while management fees over the same period also climbed rapidly, up 0.5% quarter-on-quarter and 3.5% year-on-year. As occupancy costs rise, some companies are expected to reduce their floor space or relocate to other districts.
◇Investment- In Q2 2023, a total of 12 office building transactions took place in the Seoul and Bundang districts, with a transaction volume of KRW 3.3 trillion. This represents an approximately 13% decrease year-on-year and an approximately 230% increase quarter-on-quarter, and a market recovery was observed as investment activity—which had been frozen since late last year due to deteriorating domestic and international financial conditions—resumed. Although risks in the global office market have recently come to the fore, the domestic office market holds solid fundamentals, and its risks are expected to be relatively modest compared with those overseas.
◇Retail- In Q2 2023, the vacancy rate in Seoul's high-street retail districts recorded 18.7%, down 2.7pp from the previous quarter. In Seoul's Myeongdong, the vacancy rate continued to fall as cosmetics road shops, tourist-targeted clothing stores, and accessory stores opened, while Hannam-Itaewon—which has maintained the lowest vacancy rate among Seoul's major retail districts over the past year—saw its vacancy rate drop to 10.0%. Recently, foreign tourists visiting the Hannam-Itaewon district in search of K-fashion and K-beauty have also emerged as a key customer base for the area.
Meanwhile, Cushman & Wakefield (NYSE: CWK), the parent company of Cushman & Wakefield Korea, is a leading global commercial real estate services firm serving property owners and tenants, with approximately 52,000 professionals across some 400 offices in 60 countries worldwide. In 2022, it recorded revenue of USD 10.1 billion across core service lines including property, facilities, and project management, leasing, investment advisory, and valuation. It has also received numerous industry and business accolades for its award-winning corporate culture and its commitment to diversity, equity and inclusion (DEI) and environmental, social and governance (ESG), among others. More information is available on its website.