Q1 Commercial Real Estate Vacancy Rate Slightly Decreases

[Asia Economy Reporter Ryu Taemin] The vacancy rates of offices and commercial buildings nationwide in the first quarter of this year slightly decreased compared to the previous quarter.

According to the Commercial Real Estate Leasing Trend Survey for the first quarter of this year released by the Korea Real Estate Board on the 27th, the nationwide office vacancy rate in the first quarter was 10.4%. This is a 0.5 percentage point decrease from 10.9% in the fourth quarter of last year. The Real Estate Board explained, "Although relatively high vacancy rates were observed mainly in aging offices, the vacancy rate declined compared to the previous quarter due to increased demand for shared offices and new leasing demand from startup companies."

Seoul (7.1%) recorded a low vacancy rate as abundant jobs and stable leasing demand were maintained, centered around the Yeouido and Teheran-ro commercial districts.

By region, Chungbuk (30.3%), Gangwon (24.2%), and Jeonnam (23.5%) showed vacancy rates higher than the national average, while Jeju (6.7%) and Gyeonggi (6.9%) had vacancy rates below 10%.

The vacancy rate for commercial buildings was 13.2% for medium to large-sized stores and 6.4% for small-sized stores, decreasing by 0.3 percentage points and 0.4 percentage points respectively compared to the previous quarter. Vacancy rates slightly improved as leasing demand increased following the easing of social distancing measures. By region, medium to large-sized commercial buildings in Ulsan (21.2%), Sejong (20.3%), and Gyeongbuk (18.4%) recorded vacancy rates higher than the national average. Jeju (8.6%), Seoul (9.5%), and Jeonnam (10.9%) had lower rates.

In Seoul, commercial districts such as Mangwon Station (1.7%) and Donggyo/Yeonnam (0.9%), where MZ generation inflow occurred due to the opening of popular food and beverage stores, showed low vacancy rates. On the other hand, the vacancy rate in the Myeongdong (40.9%) commercial district remained high.

Small-sized commercial buildings showed higher vacancy rates in Sejong (12.2%), Jeonbuk (10.0%), and Daejeon (8.5%), while Jeju (2.5%), Ulsan (3.2%), and Gwangju (4.0%) had lower rates. Jeju showed relatively low vacancy levels overall due to an increase in tourists. Seoul recorded 6.2%, and similar to medium to large-sized commercial buildings, there was a significant difference between Myeongdong (42.1%) and Mangwon Station (4.2%) / Donggyo/Yeonnam (0.0%).

The rental price index in the first quarter rose by 0.01% for offices compared to the fourth quarter of last year. In contrast, medium to large-sized commercial buildings fell by 0.13%, small-sized commercial buildings by 0.15%, and collective commercial buildings by 0.14%. The Real Estate Board explained, "The rental price index for offices rose as supply remained insufficient compared to demand," and "Commercial buildings declined across all types due to prolonged social distancing and continued commercial district recession."

The national average rent was highest for collective commercial buildings at 26,900 KRW per square meter, followed by medium to large-sized commercial buildings at 25,500 KRW, and small-sized commercial buildings at 19,400 KRW. Office rents were recorded at 17,300 KRW per square meter.

Investment yields were 1.99% for offices, 1.68% for medium to large-sized commercial buildings, 1.47% for small-sized commercial buildings, and 1.55% for collective commercial buildings.

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