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Savills World Research
Korea
Briefing
Seoul office sector
Q1 2015
Image : CBD, Seoul
SUMMARY
Completion of new office buildings and the relocation of state-run corporations to outside of
Seoul pushed the vacancy rate up.
 In Q1, the Seoul market saw overall
net absorption increase to 26,760 sqm
with the growth in demand coming
from the CBD and YBD. The GBD
experienced a demand decrease as
large companies and government
institutions relocated to areas outside
Seoul.
 With the overall vacancy rate
increase, the Seoul prime office market
posted only a 0.7% year-on-year (YoY)
increase in face rents, which is the
lowest level since Q2/2002.
 In March 2015, the Bank of Korea
(BOK) lowered the benchmark interest
rate by 25 basis points (bps) to 1.75%,
five months after the last interest rate
cut.
 The removal of the acquisition
tax benefit for real estate funds at
the beginning of Q1/2015 caused a
transaction rush in Q4/2014, which saw
the market volume reduced to a quarter
of the level posted in Q1/2014 and a
tenth of Q4/2014.
“Investment market transaction
volumes were 25% of the level
posted in Q1/2014, in the wake
of increased vacancy and a
decreased number of bluechip properties on the market,
as well as the revocation of tax
reductions on indirect investment.”
savills.co.kr/research
01
Briefing | Seoul office sector
Supply
In Q1/2015, three prime office
buildings: KT Gwanghwamun
East, Tower 8 and Twin City
were completed in the CBD. KT
Gwanghwamun East is used by KT,
which relocated and integrated its
offices in Gangnam & Bundang.
Tower 8 and Twin City are being
marketed for lease and they have
not had any tenants commit to
contracts. Twin City is a mixed-use
facility completed in March featuring
a hotel, officetel (studio apartments)
and office sections. It will be able
to accommodate tenants from Q2
onwards as the building is currently
being remodelled.
Our survey indicates that there are
no prime office buildings planned for
completion until Janggyo District 4 is
completed in Q1/2016. However, the
construction of Samsung Electronics’
Woomyeon-dong R&D Center, set to
be finished in Q2/2015, is expected
to lead to the relocation of parts of
Samsung Electronics’ business, a
major tenant in the GBD.
Demand and vacancy
rate
The relatively robust performance of
the US economy translated into a
strong US dollar and the US is likely
to raise its benchmark interest rate
in the second half of 2015. However,
amid a growing trade deficit and
taking into account the possibility
that the strong dollar and interest
rate increase will affect US economic
growth, no drastic change is expected
in the interest rate. Meanwhile,
China has shown gradual economic
expansion but the growth rate is
slowing down, which has resulted in
reduced exports from Korea to China.
The BOK is projecting a 0.9%
increase in consumer prices in
2015 due to plunging international
oil prices and a reduction in public
service charges; this is expected
to boost real purchasing power.
For 2015, the Korean economy is
forecasted to expand by 3.1%, which
represents a 0.3 percentage points
(ppts) downward adjustment from the
projection announced in January.
Q1 2015
TABLE 1
Monthly rent and vacancy rate by district, Q1/2015
Average rent
Average rent
YoY rental
Net absorption
(KRW per 3.3058 (KRW per 3.3058
increase rate (%)
(sq m)
sq m GLA)
sq m NLA)
District
CBD
101,000
179,900
0.9%
36,810
16.2
GBD
85,100
165,900
0.0%
-65,420
11.3
YBD
78,100
160,600
1.3%
55,370
16.9
Overall Seoul
Average
91,200
171,400
0.7%
26,760
14.7
Source: Savills Korea
*Net absorption of Seoul prime office buildings.
TABLE 2
New office supply, Q1/2015
District
Building name
GFA (sq m)
Floors
Remarks
CBD
KT Gwanghwamun East
(Cheongjin District 1)
51,120
B6/F-25/F
KT's Headquarter along with West Tower
CBD
Tower 8
(Cheongjin District 8)
51,798
B7/F-24/F
CBD
Twin City
(Dongja District 8)
32,743
(Office area)
B7/F~30/F
(Office floors
from 2/F~18/F)
Office, hotel, officetel, mixed-use retail facility,
2 buildings GFA of 91,461 sq m
Source: Savills Korea
TABLE 3
Office building planned for supply in Q2/2015
Building
Name
Samsung Electronics' Woomyeon-dong R&D Center
Address
167-2, Woomyeon-dong,
Seocho-gu, Seoul
GFA
(sq m)
330,000
Completion
Date
May 2015
Floors
B5/F-10/F
Remarks
6 buildings, Office GFA of appx. 33,000 sq m
Source: Savills Korea
GRAPH 1
Growth rate of real GDP and real exports, 2006–2016F
Economic Growth (GDP, annual variance in %)
18%
Export Growth (annual variance in %)
17.1%
16%
14%
13.4%
13.5%
12.4%
12%
10%
8%
6%
5.2%
6.5%
6.0%
5.5%
4.4%
4.5%
4%
As of February 2015, the number
of employees in the financial and
insurance sectors dropped 8% YoY
to 782,000. While overall employment
showed a steady increase, the
Vacancy rate (%)
3.3%
2%
0%
3.7%
2.8%
0.4%
2006
2007
2008
0.7%
2009
2.3%
2010
2011
2012
3.0%
2013
2.3%
2014
2.9%
3.1%
2015F
3.8%
3.4%
2016F
Source: Bank of Korea
savills.co.kr/research
02
Briefing | Seoul office sector
In Q1/2015, Seoul posted a net
absorption of 26,760 sq m. By district,
in the CBD, which saw new buildings
completed, the net absorption was
36,810 sq m. In the YBD, where the
IBM headquarters is now situated,
a net area of 55,370 sq m was
absorbed, indicating an increase in
demand. The GBD, however, suffered
a demand decrease and subsequently
a negative net absorption of -65,420
sq m, as government institutions
moved to areas outside of Seoul
and the affiliates of conglomerates
relocated their offices.
GRAPH 2
The number of employees in the financial and insurance sectors,
Mar 2006–Mar 2015
920
900
880
860
No. Employed ('000)
number of people on the payroll of
the two sectors fell to a level similar
to that of 2H/2009, which was right
after the start of the global financial
crisis. The banking sector announced
in 2015 that it would hire twice the
number of recruits that were newly
employed in 2014. However, the
Federation of Korean Industries
forecasted that recruitment by 30
major enterprises in 2015 will decline
by 6.3% from the previous year (30
March, 2015, The Korea Economy
Daily).
Q1 2015
In the GBD, an array of departures by
its tenants including the headquarters
of the Korea Asset Management
Corporation to Busan, Samsung
Heavy Industries to Pangyo and
820
800
780
760
740
720
700
680
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Source: Korean Statistical Information Service
GRAPH 3
Take-up, Q1/2015
2015 1Q
New
organisation
15%
In all three districts, a large number
of tenants relocated as their own
headquarter or office buildings were
completed. Overall the vacancy rate
of Seoul prime office buildings rose
0.6 ppts from Q4/2014 to 14.7%.
2014 1Q - 4Q
New
organisation
15%
Prime to
prime
22%
Expansion
16%
Prime to
prime
33%
Expansion
21%
Secondary
to prime
47%
Secondary
to prime
31%
Source: Savills Korea
GRAPH 4
Net absorption, Q1/2008–Q1/2015
CBD
350,000
GBD
YBD
300,000
250,000
200,000
150,000
sq m
Our survey showed diverse types
of demand for office buildings, with
the most active tenant relocations
taking place in the CBD, with large
companies moving their headquarters
and affiliates. SBI Savings Bank
moved its headquarters to Center 1.
In addition, the CBD saw a demand
increase with the opening of a
Seoul office by the Korea Evaluation
Institute of Industrial Technology (a
government agency) and new leases
by Lotte Members (AIA Tower) and SK
Telecom (Ferrum Tower). Additionally,
SK Networks and the Korea
Democracy Foundation left secondary
spaces for prime office buildings in
the area. Meanwhile, Ssangyong
Cement and Daewoo International
contributed to the CBD vacancy
increase as they moved to Songdo.
The supply of Tower 8 also helped
push up the vacancy rate in the CBD
by 1.4 ppts to 16.2%.
840
100,000
50,000
0
-50,000
-100,000
-150,000
-200,000
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2008
2009
2010
2011
2012
2013
2014
2015
Source: Savills Korea
savills.co.kr/research
03
Briefing | Seoul office sector
Dongbu Steel’s headquarters to
the CBD (STX Tower), resulted in
a vacancy increase of 3.1 ppts to
11.3%. As Hyundai Motor Group
started to house its offices in the
former headquarter building of Korea
Electric Power Corporation (Kepco).
The annex of the building is used by
Kepco’s TFT and the main building
is occupied by affiliates of the motor
company, such as Hyundai Wia and
Glovis. Hyundai Motor Company
group has filled approximately 45%
of all the leasable office area in the
former Kepco building.
The YBD posted a vacancy decrease
of 4.2 ppts to 16.9%, with the
relocation of IBM’s headquarters to
Three IFC and an affiliate of Toray
Group to FKI Tower. As for the
vacancy rates of recently supplied
Q1 2015
prime office buildings, One IFC has
no vacancy and Two IFC recorded
an approximately 10% vacancy rate,
while Three IFC is showing an 80%
vacancy rate and FKI 20%. As vacant
offices filled up, the vacancy rate in
Yeouido fell by approximately 7.9 ppts
in three quarters.
Large companies were the major
contributors to the absorption
of vacancy in Q1/2015. IBM and
Toray Group moved to prime office
buildings. Tenants relocating from
secondary buildings accounted for the
biggest proportion (47%) of overall
take-up in Q1/2015. Relocations from
prime to prime offices were mainly
led by management policy and the
strategies of large companies. In the
CBD, Hyundai Group moved from The
K Twin Towers to master-lease Twin
Trees. In the GBD, Hyundai Motors
Group, in order to protect surrounding
retail areas, moved into the Kepco
building in Samseong-dong,
where its integrated office building
will be established. There were
cases of leasing by newly created
organisations such as SK Telecom,
which opened new organisations
both in the CBD and the GBD. Savills
survey indicates that office expansion
was executed mostly by affiliates of
large companies.
Outlook
Some of the headquarters of large
companies housed in the CBD have
plans to relocate in Q2. LG U Plus will
vacate its office in LG U Plus Tower
to its own newly built office building
in Yongsan. Moreover, it is reported
that in Q2 the remodeling of Twin City
TABLE 4
Major tenant relocations, Q1/2015
District
Previous building
Area (sq m)
Tenant
District
Current Building
Yonsei Building
16,040
Daewoo International
non-core
NEATT
Pine Avenue B
14,450
Ssangyong affiliates
non-core
City Center
The-K Twin Towers
9,520
Hyundai E&C
CBD
Twin Tree
Seoul Square
3,620
LG CNS
YBD
FKI Tower
Daerung Gangnam Tower
11,260
Hyundai Glovis
GBD
Former Kepco Headquarter
Dongbu Financial Center
4,140
Dongbu Steel
CBD
STX Tower
Area (sq m)
CBD
GBD
16,650
Samsung Heavy Industries
non-core
Samsung Heavy Industries
Pangyo R&D Center
ASEM Tower
12,290
KAMCO (Korea Asset
Management Corporation)
non-core
BIFC
CBD
Seoul Finance Center (SFC)
2,380
UBS
GBD
& Bundang
Dongik Seongbong Building, Nara
Building, Bundang HQ
KT Affiliates
KT Gwanghwamun East
51,120
The-K Twin Towers
Hyundai E&C TFT
Twin Tree
10,250
Standard Chartered Bank Building
Hyundai E&C TFT
Twin Tree
3,030
Baejae Jeongdong Building
Korea Democracy Foundations
Twin Tree
2,390
Samsung SDS
Samsung Life Insurance
Taepyeongno Building
4,400
NC Tower 1
3,900
Former Kepco Headquarter
20,050
YBD
FKI Tower
10,730
CBD
Samsung Life Insurance Seocho
Tower
N/A
Grace Tower
Downsizing
CBD
GBD
Daechi dong Jeonghyun Building
GBD
& non-core
Louis Castel
Daerung Gangnam Tower and others
N/A
LG Mapo + Namsan Square
non-core
Hyundai Wia, Hyundai Special
Steel, Hyundai Glovis
Toray Advanced Materials Korea,
Toya International
GBD
SBI Saving Bank Building
SBI Saving Bank
CBD
Center 1
8,380
Military Mutual Aid Association
IBM
YBD
Three IFC
29,420
New Organisation
Lotte Members
CBD
AIA Tower
3,440
New Organisation
LG Chem
YBD
FKI Tower
3,670
New Organisation
SK Telecom
GBD
Golden Tower
3,540
New Organisation
SK Telecom
CBD
Ferrum Tower
5,070
non-core
Source: Savills Korea
savills.co.kr/research
04
Briefing | Seoul office sector
will be completed and the building
will be available to the market, which
is projected to lead to a vacancy
increase of 2~3 ppts in the CBD.
Q1 2015
GRAPH 5
Seoul prime office vacancy rate, Q1/2002–Q1/2015
CBD
GBD
GBD (excluding Kepco)
YBD
30%
Rent rates
In Q1/2015, a total of 10 office
buildings raised rents (six in the
CBD, three in the GBD and one in
the YBD). However, there were some
buildings that lowered rents amid
expanding vacancy: one in the CBD
and three in the GBD. Due to large
companies moving to their own office
buildings and government institutions
relocating to areas outside Seoul,
vacancy rates of office buildings for
lease rose. As a result, higher tenant
improvement allowances are being
provided to tenants so effective rents
have dropped. Our survey shows
that there are some office buildings
that also lowered asking rents at the
marketing phase. The rent increase
in the GBD was 0.0% while the CBD
and the YBD recorded a 0.9% and
1.3% increase respectively. With
the CPI falling below the 1% level,
the maintenance fee increase rate
dropped to 1%~1.6% in all three
major office districts.
Outlook
In 2015 the prime office rent increase
rate will be affected by growing
vacancy and a declining CPI. In Q2,
the rent increase rate of prime office
buildings is likely to remain at a level
similar to that of the previous quarter.
20%
15%
Including
Kepco
11.3%
Excluding
Kepco
10.2%
10%
0%
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
5%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 2015
Source: Savills Korea
GRAPH 6
Seoul prime office rental indices, Q1/2000–Q1/2015
CBD
GBD
YBD
180
160
140
120
100
80
60
40
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
In Q2, the vacancy rate in the YBD
is likely to remain at a level similar to
that of Q1 but when the company,
which is currently in negotiations with
Three IFC moves in, the vacancy rate
of the district will further decrease by
1~1.5 ppts.
25%
Q1/2001 = 100
In the GBD, with some large
companies also planning to move out,
the vacancy rate is expected to climb
further. The organisations of Samsung
Electronics housed in the company’s
own office building in Seocho are
to leave their current offices for the
Samsung Electronics R&D Center
in Woomyeon-dong, which is slated
for completion in May 2015. In turn,
Samsung Electronics’ organisations
currently leasing in Hanwha Life
Insurance building are expected to
fill the space to be vacated in the
Samsung Electronics Seocho office
building. SK Hynix is to relocate to
SK U-Tower in Bundang and, as a
result, the GBD is projected to see its
vacancy rate go up by 2 ppts.
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 2015
Source: Savills Korea
GRAPH 7
YoY rental increase rate by district, Q1/2008–Q1/2015
CBD
9%
GBD
YBD
CPI growth rate
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2008
2009
2010
2011
2012
2013
2014
2015
Source: Savills Korea, Bank of Korea
savills.co.kr/research
05
Briefing | Seoul office sector
Q3
Q4
4
3
2
1
0
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: Savills Korea
GRAPH 9
Prime office building cap rate trends, Q1/2005–Q1/2015
Spread (RHS)
Cap rate (LHS)
Five-year treasury bond yield (LHS)
900
8%
800
7%
700
6%
600
5%
500
4%
400
3%
300
2%
200
1%
100
0%
0
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
9%
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Source: Savills Korea, Bank of Korea
GRAPH 10
Five-year treasury bond yield and benchmark interest rate trends,
Jan 2012–Apr 2015
Five-year treasury bond yield
Benchmark rate
4.0%
3.8%
3.5%
3.3%
3.0%
2.8%
2.5%
2.3%
2015/04/14
2015/02/25
2015/01/05
2014/11/18
2014/10/02
2014/08/11
2014/06/24
2014/04/30
2014/03/13
2014/01/22
2013/12/03
2013/10/16
2013/08/22
2013/07/03
2013/05/14
2013/03/26
2013/02/04
2012/12/13
2012/10/28
2012/09/06
1.8%
2012/07/19
2.0%
2012/05/31
BOK lowered the benchmark interest
rate 25 bps from 2.0% to 1.75% in
March 2015. It is believed that the
BOK’s decision is attributable to low
upward pressure on prices due to the
downward trends in raw material and
oil prices, along with the downward
adjustment of the economic growth
rate. Even though effective rents are
on the decrease as the vacancy rate
rises, the cap rates of prime office
buildings will remain in the low 5%
Q2
5
2012/04/10
As of Q1/2015, it is known that
transactions are underway for Citi
Bank in the CBD; Dohwa Engineering
Building in the GBD; the building
of Small and Medium Business
Corporation (SBC) in the YBD; and
Seobu Finance Center in Guro.
Citibank is reported to have chosen
Mastern Investment Management as
a preferred negotiator and the sale
process is targeted for completion in
June 2015.
Q1
6
2012/02/21
City Center changed hands from
the Ssangyong Town PFV to Igis
Asset Management for KRW202.5
billion (KRW18.3 million per 3.3058
sq m). The building was used as
Ssangyong’s office building from
1969 until the remodeling that started
in 2013. After the remodeling was
completed in November 2014, the
building’s rent rose by approximately
50% to KRW89,000. With major
tenants including Ssangyong’s
affiliates and Samsung Fire & Marine
Insurance, 75% of the office area was
leased out before completion of the
remodeling. Assuming stabilisation
of the building operation (95%), the
building is estimated to generate
profits in the 6% range but currently
the initial profit rate is known to be
in the high 4% range. The investors
in the building are AEW Capital and
Samsung Fire & Marine Insurance.
AEW is a global real estate investment
company and City Center marks their
first investment in Korea.
Seoul office transaction volumes, Q1/2007–Q1/2015
2012/01/02
In Q1/2015, two transactions were
concluded for major office buildings:
Ssangyong Cement Industrial’s
office building City Center and
Hana Daetoo’s office building in
Yeongdeungpo. The total value of
transactions executed in Q1 reached
only a quarter of the amount posted
for Q1/2014. Such a decline is
believed to be attributable to a rush
of transactions completed in Q4/2014
before the acquisition tax cut was
revoked at the end the year.
GRAPH 8
KRW (trillion)
Transactions and
Investment market
Q1 2015
Source: Bank of Korea
savills.co.kr/research
06
Briefing | Seoul office sector
range. This is due to the abundant
liquidity that has resulted from low
interest rates, and has translated
into the spreads between five-year
government bonds and the average
cap rate climbing for three quarters
in a row.
Amid such market conditions, the top
10 domestic pension funds, including
the National Pension Service,
announced that they will expand the
Q1 2015
proportion of alternative investments
in their portfolio. In particular, with
the ultra-low interest rates for
bonds, pension funds are known
to be diversifying their investments
to achieve target profit levels. The
Korean Teachers’ Credit Union
and the Korean Teachers’ Pension
announced that they will place more
focus on opportunistic funds, namely
investment products seeking high
profits and value-add investments,
which pursue value appreciation
through additional development
after investment. The Public Officials
Employee Pension is also taking
a great interest in investment in
high-yield properties and the Public
Officials Benefit Association is
expected to see the proportion of
alternative investments exceed 50%
of its entire investment volume this
year for the first time.
TABLE 5
Major investment transactions, Q1/2015
District
Property
Seller
Buyer
Transacted area
(sq m)
Transaction price
(KRW bil)
CBD
City Center
Ssangyong Town PFV
Igis Asset Management
36,573
202.5
Non-core
Hana Daetoo’s office
building in Yeongdeungpo
Hana Daetoo Securities
Samgyeong BM Korea
5,076
18.4
Source: Savills Korea
Please contact us for further information
Savills Korea
Savills Research
K.D. Jeon
Head of Korea
Korea
+82 2 2124 4101
[email protected]
Youngtaek Kim
Vice President
Korea
+82 2 2124 4208
[email protected]
Hyosung Kim
Senior Director
Korea
+82 2 2124 4204
[email protected]
Sue Lee
Director
Tenant Rep.
+82 2 2124 4180
[email protected]
Grace Ko
Director
CRES Leasing Service
+82 2 2124 4115
[email protected]
Seunghan Lee
Director, Leasing &
Marketing, Development Sales
+82 2 2124 4253
[email protected]
Crystal Lee
Senior Director
Investment Advisory
+82 2 2124 4163
[email protected]
JoAnn Hong
Director
Korea
+82 2 2124 4182
[email protected]
Simon Smith
Senior Director
Asia Pacific
+852 2842 4573
[email protected]
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Briefing | Seoul office sector
Q1 2015
Appendix
Overview of the Seoul office market and Savills Korea office survey
TABLE 6
Summary of surveyed buildings, Mar 2015
A
B
CBD
GBD
YBD
Total
Number of buildings
24
14
8
46
Average GFA (sq m)
81,875
96,231
103,691
90,038
Average year of completion
2003
1999
2002
2002
Number of buildings
20
19
10
49
Average GFA (sq m)
53,196
42,824
49,218
48,363
Average year of completion
1999
1999
1996
1999
Total number of buildings
44
33
18
95
Total area (sq m)
3,028,914
2,160,895
1,321,707
6,511,516
Source: Savills Research & Consultancy
Close to 66% of large office buildings
(30,000 sq m or more) in Seoul are
located in three major business
districts – the CBD (32.5%), GBD
(20.0%) and YBD (13.9%). The CBD
is the largest of these districts and
is home to major government and
multinational institutions. The GBD
also houses many multinational
companies and is an information
technology centre, while YBD, the
"Wall Street" of South Korea, includes
the headquarters of major securities
firms and broadcasting companies.
The Savills Korea Quarterly Office
survey is the longest running survey
of prime office stock in Seoul.
Established in 1997, it currently
comprises 95 of the 121 buildings in
Seoul classified as "prime" buildings.
Prime buildings: Buildings with a GFA
greater than 30,000 sq m with good
accessibility and facilities, a high
level of finish, and creditworthy bluechip tenants.
Monthly rent: Surveyed rents are
"face rents", the asking rents
reported by landlords for mid-level
floors. These rents are standardised
by Savills Korea to account for
variations in the security deposits
required by different landlords to
produce an effective rental figure for
NLA.
Cap rate calculation method
Cap rate: (income from interest on
security deposit (5%) + face rent of a
standard floor + residual income from
maintenance fee) × occupancy rate
(95%) × 12 / transaction amount
For comparison of cap rates of each
transaction case, a 5% interest
rate on security deposit and 95%
occupancy rate were uniformly
applied.
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