Savills Korea: “Office Market Amid High Interest Rates... Selective Investment Focused on High-Quality Assets”

[Financial News] Seoul’s prime office investment market maintained a steady flow of transactions focused on high-quality assets despite high interest rates. However, analysts say investors are increasingly taking a cautious and selective approach amid higher financing costs and rising lending rates.
According to the “Q3 2026 Seoul Prime Office Report,” published on the 28th by global real estate services firm Savills Korea, total transaction volume in Seoul’s office investment market in the third quarter was approximately 6.2 trillion won. This was similar to the approximately 6.3 trillion won recorded in the same period a year earlier. Despite the increased cost of financing following successive interest rate hikes, deals were completed mainly for stable income-generating assets with long-term tenants and value-add assets.
Major transactions included IGIS Asset Management’s 890 billion won purchase of Doosan Tower in Dongdaemun through a share deal, Pine Avenue Tower A, which Shinhan Card continues to use as its headquarters, and Gangnam 358 Tower, which is leased long-term by a Samsung Group affiliate.
The leasing market maintained solid demand, particularly in major districts. Seoul’s prime office vacancy rate averaged 4.6% in the third quarter, while the Gangnam Business District (GBD) posted a particularly low rate of 1.8%, demonstrating the strongest leasing demand. Average face rents and management fees continued to rise year over year, driven in part by higher labor and operating costs.
However, the leasing market is expected to see a pronounced divergence between districts from the fourth quarter onward. In the Central Business District (CBD), the addition of Eul Tower and vacancies in large buildings are expected to push the vacancy rate up to around 9%. By contrast, the GBD and Yeouido Business District (YBD) are expected to remain stable, buoyed by relatively limited new supply.
Meanwhile, concerns about declining office profitability have grown as market interest rates rise, and upward pressure on capitalization rates (cap rates) is expected to persist. Hong Ji-eun, executive vice president and head of the Research & Consultancy Division at Savills Korea, said, “The leasing fundamentals of Seoul’s office market remain solid, but in the investment market, careful scrutiny of financing conditions and pricing is essential.” She added, “The trend toward selective investment focused on high-quality assets and assets with potential for value appreciation will continue.”

[email protected] Jeon Min-kyung Reporter