CBRE Korea: ‘Office Demand Expected to Remain Stable as Office Utilization Rates Pick Up along with Gradual Increase in Attendance’

- Increased demand for office expansion and strong demand for office building upgrades uncovered
- Trend toward Flight-to-Green poised to expand with increasing plans to lease more green office space

December 11, 2023 (Seoul, Korea) – According to the “2023 Korea Office Occupier Sentiment Survey” released on December 11 by CBRE Korea, the global real estate service company, it was found that more than 40% of companies worldwide are seeking to increase the rate of employees working from the office and office utilization among Korean-based respondents was found to be approximately 70%, the highest among major countries around the word. Also, as half of respondents in both Asia Pacific and Korea noted that they had already fully returned to office-based work, about 40% of domestic respondents expect office utilization to increase from current levels.

The rapid return to the office has boosted leasing demand over the past year, with vacancy falling in Seoul's Grade A office market and it is analyzed that occupiers are focusing on lease renewals amid ongoing uncertainty such as a potential global economic downturn and continued high interest rates. More than 90% of all respondents were found to have already decided or are planning to remain in their existing office.

Amid concerns about a slowdown in corporate growth due to slower global economic momentum witnessed since last year, demand for office expansion from tenants in Seoul’s Grade A office market has increased compared to previous years. This year’s survey found that 61% of respondents stated that they plan to expand their office space over the next three years, with approximately 10% stating that they plan to expand their floor area by more than 30%, indicating a change in strategy.

Claire Choi, director of CBRE Research Korea, explained, “The Seoul Grade A office market is expected to see solid office demand for the foreseeable future as employees return to the office and companies gear up for expansion. Several major upcoming redevelopment projects scheduled to be completed after 2026, mainly in the CBD, will somewhat alleviate the supply and demand imbalance in the mid to long term”.

Three-quarters of cumulative leasing transaction volume in Seoul in Q3 2023 involved flight-to-quality relocation and strong demand for office building upgrades was uncovered, with domestic companies such as finance and manufacturing firms the main sources of demand.

In addition, factors that tenants consider most important when making office leasing decisions were found to be accessibility to public transportation (82%), followed by shared meeting space (77%) and onsite F&B (68%).

With reducing greenhouse gas emissions now an urgent priority, the importance of sustainable or green real estate is increasing, resulting in 64% of respondents saying that would lease more green office space over the next three years. Increasing interest in green buildings that meet ESG standards was also seen. As a result, flight-to-green is becoming the norm, and 70% of respondents said that they wanted green buildings to provide data relating to energy use and waste treatment, while a majority stated that they wanted information relating to carbon emissions.

Lastly, there has been a notable shift in workplace strategies. Although half of the respondents are currently using fixed seats, the adoption of flexible seating arrangements is also gradually gaining traction in Korea as respondents expect flexible seating to increase to 90% by 2025, as well as activity-based working to 40%.