This article was published on Feb. 6, 2025, at 2:31 p.m. on the ChosunBiz MoneyMove site.
The transaction polarization in the commercial office market in Seoul is deepening. While large listings in the central business district (CBD) of Jongno and Gwanghwamun continue to accumulate, activity is ongoing in the Gangnam region (GBD).
According to investment bank (IB) industry sources on the 6th, the speed of recent building sales in the GBD is accelerating. A notable example is the former Seoul headquarters of NCSOFT, dubbed 'NCSOFT Tower 1,' which was the first commercial office bid of the year. Last month, NCSOFT conducted the sale bid for NCSOFT Tower 1, successfully attracting bids from eight potential buyers.
At the end of last month, NCSOFT selected three of these as qualified candidates (shortlist). Following this, interviews were conducted again, and the consortium of Pacific Asset Management and the Korea Science and Technology Promotion Association was designated as the preferred negotiating party. This consortium is reported to have proposed a price in the higher 40 million won range per 3.3 square meters. Given the intense competition, if this acquisition goes through, it is expected to break the historical high transaction price for GBD office buildings.
An IB industry official noted, 'There is high demand from corporations looking for new headquarters along Teheran Road in Samseong-dong, Gangnam-gu, and the expectation that stable revenue can be generated due to the surrounding building prices has already led to predictions that properties in the 300 billion to 500 billion won range would be popular, as the financial burden is not significant.'
'Gangnam N Tower,' also located on Teheran Road, is expected to see fierce competition for acquisition as well. KB Real Estate Trust aims for bidding in March and deals to close in the first half of the year. It falls under the category of new construction among offices over 15,000 pyeong in the GBD, and it is reported that many prospective buyers have participated in tours, indicating its popularity. KB Real Estate Trust put Gangnam N Tower back on the market six years after acquiring it for 468 billion won in 2018. In addition, buildings such as the Samseong-dong Building, BNK Digital Tower, and the Samseong-dong WeWork building are also preparing or progressing for bids.
However, along with the GBD, the atmosphere in the CBD, another major office area in Seoul, is quite different. The Euljiro area has seen large-scale development recently, with a rapid increase in supply, but unsold properties are also on the rise. Due to a lack of market funds, there is a trend favoring high-quality mid-sized offices below the 500 billion won range, but large buildings dominate this area.
In fact, transactions in the CBD have been failing due to discrepancies in expectations between sellers and buyers. The Government of Singapore Investment Corporation (GIC) conducted two rounds of bidding for the Seoul Finance Center (SFC), considered a 'trophy asset,' at the end of last year but ultimately withdrew the sale. GIC expected a price of 40 million won per 3.3 square meters, but bidders offered around 33 million won. The Pacific Tower in Seosomun-dong also abandoned its sale for similar reasons and is pushing for a fund maturity extension. DAISHIN SECURITIES shifted its strategy to a real estate investment trust (REIT) approach after repeated failures to sell its headquarters, 'DAISHIN 343 (formerly DAISHIN Finance Center).'
There are also criticisms that the attractiveness of existing listings in the CBD is declining. A significant number of new office spaces are expected to be supplied in the future, and there is a greater preference among corporations to establish headquarters in Gangnam rather than Euljiro. For example, the Korea Science and Technology Promotion Association, which was selected as the preferred candidate for NCSOFT Tower 1, had previously sought out the CBD for a new headquarters. It showed interest in acquiring Jongno Tower in 2022 and recently attempted to pre-purchase a new office in the 6th district of Euljiro 3, but withdrew the plan.