Southern Seoul's Gangnam District / gettyimagesbank

Despite the country's not-so-bright economic outlook for 2024, Seoul's prime office building market is expected to continue enjoying high demand next year, a global real estate firm said Tuesday.

During a press conference earlier in the day, Cushman & Wakefield Korea's head of research Jung Jin-woo highlighted that Korea's domestic office market has demonstrated sustained high demand for office leases, even after the pandemic. It has been recording a vacancy rate of about 2 percent since the third quarter of 2022, lower than the U.S., Japan, China, Hong Kong and Singapore.

"While the growth outlook of the Korean economy for 2024 has recently been downwardly adjusted, the demand for office space in Korea remains robust compared to other major countries, as seen in the 2 percent vacancy rate from the third quarter of 2022," Jung said.

Jung Jin-woo, head of research at Cushman & Wakefield Korea, speaks during a press conference in Seoul, Tuesday. Korea Times photo by Anna J. Park

Jung gave a four-pronged explanation of the sustained high demand for office space in Korea: the country's solid economic growth over the past decade, the actual end of work from home, companies' increased preference for quality office space and an insufficient supply of new office buildings.

Firstly, Korea's average annual economic growth rate over the past 10 years stood at 3.3 percent, which is higher than some major economies, including the U.S., U.K., Germany, Australia and Japan. Also, the Korean economy exhibited a relatively lower contraction in economic growth during the COVID-19 pandemic compared to major countries, subsequently demonstrating a swift recovery resilience.

Secondly, the average number of remote working days per week in Korea is at the lowest level globally, which is a key factor to the robust demand for office space in the country. The head of research cited a recent global report, explaining that the average number of days working from home per week in Korea was surveyed at 0.4, which is far lower than the global average of 0.9.

"Another factor attributed to the high demand for office space in Korea is the country's relatively low per capita residential occupancy space, compared to that of advanced countries. While Korea's average per capita residential occupancy space is only 34 square meters, Australia's figure stands at 89 square meters, and the U.S. at 77 square meters. The lack of enough personal space at residences also contributes to the sustained demand for office space," Jung said during the press conference.

Jung Jin-woo, head of research at Cushman & Wakefield Korea, speaks during a press conference in Seoul, Tuesday. Courtesy of Cushman & Wakefield Korea

Additionally, Jung explained that more companies are showing a tendency to prefer quality office space to attract competent employees as well as raise workers' productivity. This creates strong demand for business relocation, leading to even higher demand for prime office buildings.

"Reflecting such tendencies, the average rent for prime office buildings increased by 7.3 percent in the third quarter of this year, compared to the same period of last year," Jung said, adding that the rent at prime buildings is expected to increase further.

He also pointed to the insufficient supply of new office buildings in the coming years. The supply during five years from 2021 to 2026 is expected to reach only about one-third of the levels in the previous five years, owing to various factors including rising construction costs, interest rate hikes and increases in material and labor expenses.