This year, office prices in the Seoul area are expected to rise by 1 to 1.5% compared to last year. This is because a decrease in interest rates is anticipated, leading to increased investment demand in Seoul offices, primarily from strategic investors (SIs). The continued willingness of corporations to rent offices in Seoul is also a reason for the predicted rise in office prices.
However, the slowdown in consumption and investment, along with a worsening trade environment, could lead to a decline in corporations' profits, serving as a constraint on the increase in office values.
According to the Korea Construction Policy Institute's forecast on 'Commercial Real Estate in 2025,' office prices are expected to rise by 1 to 1.5% this year compared to the previous year.
Lee Sang-jun, a director at RSquare, noted, 'The investment demand for Seoul offices remains solid, and corporations are also inclined to rent offices in Seoul, leading to an expected rise of about 1 to 1.5% in transaction prices compared to last year.' He also added, 'The locational characteristics of Seoul continuously generate demand for offices, leading to increases in rental and transaction prices.'
The anticipated decrease in the domestic base rate is also one of the reasons predicting an increase in office prices. It is projected that the domestic base rate will fall 2 to 3 times this year. If interest rates decline, the capitalization rate (Cap rate) related to office investment will decrease, which can influence the rise in office prices.
However, as economic growth slows, corporations may feel the burden of office rental costs, which is a factor that could limit the rise in office prices. Last year, the nominal rent for offices in the Seoul area was about 109,000 won per pyeong (3.3㎡).
The director explained, 'In a situation where the economic growth rate is expected to be around 1.4 to 1.6% next year, corporations may feel the burden of high office rental costs, weakening the increase in net operating income. This year, the office market is expected to show opposing effects of corporations' performance and improvements in the financial environment, and the degree of increase in office prices may vary depending on the relative sizes of these effects.'
In the commercial real estate sector, logistics centers are expected to continue experiencing the effects of past oversupply this year. The supply of logistics centers surged during the COVID-19 pandemic. However, due to rapid increases in construction costs, declining investment sentiments, and a decrease in fresh food consumption, the completion volumes have been declining since last year. The transaction volume for logistics centers last year was estimated at about 3.8 trillion won, which is only 76% of the previous year's transaction volume. Consequently, starting this year, more cases of logistics centers being traded at lower prices are anticipated.
The director stated, 'The supply of logistics centers will continue to decline this year, and transactions will likely focus on non-performing loans (NPLs) such as auctions and substitution payments.' He added, 'The excessive supply of low-temperature storage facilities is also expected to be adjusted to find an appropriate balance between demand and supply.'
Regarding data centers, it is projected that transactions will increase this year as substantial completions occur. However, it is expected that there will be a temporary shortage of supply compared to market demand due to the necessity of consultations with policy authorities and securing power. The planned supply of new data centers in the country is observed to start with 15 this year, totaling 732 by 2029.