Seoul's prime office market bucks broader investment slowdown

Seoul's prime office market is seeing a fresh wave of major property transactions, with landmark properties changing hands or being put up for sale even as rising borrowing costs weigh on investment activity.

Earlier this month, Samsung SRA Asset Management selected Igis Asset Management as the preferred bidder to acquire K-Twin Towers in central Seoul for 1.05 trillion won ($782 million).

Located across from Gyeongbokgung in the Gwanghwamun area, the asset has maintained full occupancy, with blue-chip tenants including Microsoft Korea and Woori Card.

The price translates to approximately 12.52 million won per square meter, marking the highest transaction price for an office building with a gross floor area of at least 33,058 square meters in Seoul’s Central Business District, a key benchmark for prime office assets.

Samsung SRA acquired the property in 2018 for 713.2 billion won, making the sale price more than 330 billion won above the acquisition price.

At least five prospective buyers competed in the bidding, including the country's three largest real estate asset managers, according to Samsung SRA.

Meanwhile, State Tower Namsan, another landmark office property in central Seoul, has also gone up for sale. Its owner, Mirae Asset Global Investments, recently invited domestic and overseas real estate advisory firms to submit proposals to advise on the sale, according to industry sources.

Bids are reportedly due in early November, with a preferred bidder expected to be selected early next year. The property is expected to fetch at least 800 billion won, equivalent to approximately 12.1 million won per square meter.

Mirae Asset acquired the building for 588.6 billion won in 2019. Having opened in 2011 near Shinsegae Department Store’s main branch, it houses tenants including the Korea Investment Corp., Bain & Co., Pfizer Korea and BMW Korea.

ABL Tower in Yeouido, western Seoul, has also attracted a buyer. Earlier this month, ABL Life selected Koramco REITs Management and Trust as the preferred bidder for the property, with the buyer reportedly offering around 346 billion won, or some 8.8 million won per square meter.

The insurer has been seeking to sell the tower to improve capital efficiency and strengthen its financial structure following its incorporation into Woori Financial Group last year.

The deals come as demand for high-quality office space remains resilient, even with investment activity slowing amid expectations of further base rate hikes.

According to CBRE Korea's report released earlier this month, the average vacancy rate for Grade A offices across Seoul's three major business districts fell 1.1 percentage points from the previous quarter to 3.1 percent.

"This quarter confirmed the resilience of occupier demand in Seoul's office market, as the absorption of newly supplied space in the CBD progressed and leasing activity continued at prime properties in Gangnam and Yeouido," said Claire Choi, senior director and head of research at CBRE Korea.

The broader investment market, however, faces headwinds from further monetary tightening by the Bank of Korea.

According to an analysis of transaction records from the Land Ministry, the total value of office building transactions in Seoul fell 27 percent to 718 billion won in August from 983.4 billion won in July.

Choi pointed out that with fewer transactions set to close in than fourth quarter than in the prior year and full-year investment below the 2025 level, "Market differentiation is also likely to become more pronounced, with greater emphasis on individual asset fundamentals, including location and tenancy stability."