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Covid-19 set to impact Seoul office market in Q2

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An aerial view of Namsan Square, the most expensive building to be transacted in the first quarter of 2020. THE KOREA HERALD/ANN

Covid-19 set to impact Seoul office market in Q2

Seoul's prime office building market will face flagging demand due to the coronavirus coupled with new supply in the second quarter, which will create more empty space within the properties and reduce their cash flow, Savills Korea said in a report last week.

Savills Korea, the South Korean unit of the UK-based real estate firm, said real estate investors in the country are expected to take a cautious stance as uncertainties in the leasing market are likely to erupt in terms of the proposed buyers’ financing conditions, while liquidity risks are on the rise.

In the meantime, Seoul will finish the construction of SG Tower in central Seoul in the second quarter and Parc 1 complex in Seoul’s financial district on Yeouido islet in the third quarter, among others.

Savills Korea research director JoAnn Hong said: “Occupier demand is expected to soften as the epidemic drags on the economy.

“Subdued demand and new supply additions equivalent to eight per cent of total stock in March 2020 will drive up vacancy at a faster pace starting in the second quarter of 2020.”

Meanwhile, the impact of the coronavirus pandemic has yet to hit the commercial real estate market in the Korean capital as of the first quarter.

The volume of transactions by Seoul’s prime office properties rose 14 per cent to 2.4 trillion won ($2 billion).

Key deals include Igis Asset Management-led acquisition of Namsan Square for 505 billion won, the Taepyeongro Building deal that cost 302.5 billion won and NH-Amundi Asset Management’s purchase of the Orange Center for 252 billion won in the central business district, as well as BNK Asset Management’s BNK Yeouido Building purchase for 271.5 billion won.

Also, the buildings’ vacancy rate – often used to gauge the real estate asset’s financial health – fell slightly to 7.5 per cent, as most tenants signed their contracts prior to the arrival of Covid-19.

THE KOREA HERALD/ASIA NEWS NETWORK

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