Vacancy in Seoul's prime office market rose for the quarter as two large new towers opened downtown, with the citywide average climbing 0.4 percentage point to 4.6% in the three months to September, Savills Korea said in its quarterly report. The increase came almost entirely from the central business district, where vacancy jumped 1.3 points to 7.3%.

The figures split Seoul into two markets. Gangnam, the southern business district, remains tight, with vacancy of 1.8%. The old downtown, by contrast, is absorbing a wave of new space just as borrowing costs rise, a combination that matters for landlords, lenders and the funds that buy Seoul offices.

Rents have held up so far. The average prime office rent rose 5.5% from a year earlier to 136,400 won per pyeong (3.3 square meters) a month, Savills said, with the CBD up 6.4%, Gangnam up 4.8% and the Yeouido district up 4.6%. But the consultancy said rent-free periods are lengthening in buildings with high vacancy.

New Supply Lifts CBD Vacancy

The CBD's jump reflects completions rather than weak demand. G1 Seoul, with 143,432 square meters, and Rene Square, with 60,344 square meters, were finished in the second quarter and entered Savills' survey in the third. Together they added about 204,000 square meters, Real Estate Asia reported, citing Savills.

The district still recorded the strongest net absorption in the city, at 91,300 square meters. Rene Square was taken in full by the Serious Crimes Investigation Agency for its headquarters and Seoul office, a single lease of 50,800 square meters. MetLife became the first tenant at G1 Seoul, taking 12,800 square meters after moving from Seoul 707 Tower in Gangnam. CJ Olive Young expanded into space at KDB Life Tower, according to the report.

Citywide net absorption came to 99,700 square meters in the quarter, Savills said, a pickup from the first half.

More space is coming. EUL Tower, with 44,907 square meters, is due in the fourth quarter and has not signed any tenants, Savills said, and G1 Seoul has no confirmed occupier beyond MetLife. Several large tenants are also due to leave CBD buildings, including Ssangyong C&E, which is moving its headquarters to Donghae in Gangwon province. With new supply and move-outs landing at once, Savills expects CBD vacancy to rise to about 9%.

There is relief further out. Savills said no new prime office supply is scheduled for Seoul in 2027, which would give the new towers time to fill.

Gangnam Stays Tight, Yeouido Improves

Gangnam was the only district with negative net absorption, at minus 4,200 square meters, as Juniper Networks Korea left 2,100 square meters at Arc Place and PRND Company vacated 1,600 square meters at Samsung Life Seocho Tower. Even so, vacancy stayed below 2% for a fifth consecutive quarter. Savills expects it to edge up in coming quarters as G Market Global prepares to vacate five floors, or 26,000 square meters, at Gangnam Finance Center, but to stay below 5%.

In Yeouido, the city's financial district, vacancy fell 0.6 point to 3.6%, below 4% for the first time since the second quarter of 2023, according to Savills. Prada moved into 3,700 square meters at Parc.1 Tower 1 from Cheongdam-dong, and flexible office operator JustCo leased 3,400 square meters at Parc.1 Tower 2. Net absorption in the district was 12,600 square meters.

One quirk of the quarter: in the second quarter, Gangnam's average nominal rent topped the CBD's for the first time since Savills began its analysis in 1997. The CBD moved back ahead in the third quarter, which Savills attributed largely to the inclusion of the expensive new towers and the removal of two Hanwha buildings now being refurbished.

Higher Rates Weigh on Pricing

The bigger question for owners is valuation. Savills estimated that the effective capitalization rate for Seoul prime offices, which accounts for rent-free periods, rose slightly from the prior quarter to the low-to-mid 4% range, with the nominal rate in the high 4% range. It linked the move to two consecutive increases in the base rate and a rapid rise in government bond yields and mortgage-lending rates, and said upward pressure on cap rates could continue.

Office deals in Seoul totaled about 6.2 trillion won in the third quarter, roughly level with 6.3 trillion won a year earlier, Savills said. Some transactions have been delayed as funding costs climb, and buyers are focusing on assets with long-term tenants or value-add potential. Savills said 2026 volume is unlikely to exceed last year's total.

Demand has support from the wider economy. Savills noted that the Bank of Korea raised its 2026 growth forecast to 3.3% in August, citing the semiconductor boom, and South Korea's economy grew faster than expected in the third quarter.

The next test comes with EUL Tower's completion in the fourth quarter, the last major prime building scheduled in Seoul before the supply pause in 2027.