"Mid-to-Large Officetel Price Increase Trend to Continue for the Time Being"… KB Officetel Statistics Released

KB Financial Group Announces KB Officetel Statistics to Provide Useful Information on the Officetel Market

[Asia Economy Reporter Park Sun-mi] Office-tel prices have shifted to a sharp rise since the second half of last year, and sales transaction volumes have also turned to an upward trend. With office-tel supply expected to significantly decrease in the future, it is forecasted that the price increase trend will continue for the time being, especially for medium- to large-sized office-tels.

According to the report "KB Office-tel Market Trends Based on KB Statistics," published by KB Financial Group on the 25th to provide various information about the office-tel market, nationwide office-tel prices have been rising continuously since the second half of 2015. In June this year, the 'KB Office-tel Price Index' recorded 117.9, which is 17.9% higher compared to the baseline of January 2019 (100). Notably, prices slightly declined in 2019 but shifted to a sharp rise after the second half of 2020. Among the five regions of Seoul, areas adjacent to business centers such as downtown, Gangnam, and Yeouido are recording high price growth rates.

The average office-tel price by region was 260 million KRW in the metropolitan area and 180 million KRW in the five major metropolitan cities. Compared to the same month last year, the metropolitan area increased by 34 million KRW, and the five metropolitan cities rose by 24 million KRW. Among the five regions of Seoul, the average sales prices in the downtown, southeast, and southwest areas exceeded 300 million KRW. Both the metropolitan area and the five metropolitan cities showed that relatively larger medium- to large-sized office-tels led the price increase trend.

Since 2016, office-tel sales transaction volumes had been decreasing but sharply increased in 2020. The upward trend continued this year, with nationwide office-tel sales transactions in the first quarter rising 47% compared to the same period last year. By region, the metropolitan area increased by 56%, and the five metropolitan cities by 27% in transaction volume.

The average jeonse (long-term lease) price is also on the rise. As of June 2020, the nationwide average general jeonse transaction price for office-tels was 190 million KRW. By region, the metropolitan area was around 200 million KRW, and the five metropolitan cities about 130 million KRW. Compared to the same month last year, the metropolitan area increased by 21 million KRW, and the five metropolitan cities by 7 million KRW.

As of June, the nationwide ratio of office-tel jeonse price to sales price rose to 82.5%. Since the second half of 2015, when office-tel sales prices turned upward, jeonse prices have also increased, resulting in a continued rise in the sales-to-jeonse price ratio.

However, nationwide office-tel rental yields continue to decline. By region, the metropolitan area's rental yield fell below 5% in November 2018 and recorded 4.67% as of June this year. Within the metropolitan area, rental yields in Gyeonggi-do, where sales prices have risen sharply, are declining relatively quickly, with Incheon being the only region maintaining a rental yield in the 5% range.

Over the past three years, office-tel supply has significantly increased, especially in the metropolitan area, causing oversupply issues in concentrated regions. However, since 2021, office-tel pre-sale volumes in Gyeonggi-do are expected to sharply decrease, reducing market pressure from oversupply in the metropolitan area.

Accordingly, the price increase trend centered on medium- to large-sized office-tels is expected to continue for the time being. Even considering differences in complex size or community facilities, office-tels form a relatively lower price range compared to small apartments, which is one of the factors attracting demand.

A KB Management Research Institute official analyzed, "Recent characteristics of the office-tel market can be summarized as follows: ▲ an increase in investment demand purchasing office-tels with jeonse, leading to a higher proportion of jeonse transactions, ▲ formation of a market centered on medium- to large-sized office-tels in the metropolitan area and synchronization with the housing sales market, and ▲ increased preference for newly built office-tels, expanding the price gap between old and new buildings."

This content was produced with the assistance of AI translation services.