You Need to Be Right on the Main Road for High Demand... Just 5-10 Meters Away, "No Inquiries at All" [Gangnam Real Estate Polarization] ①

Even Top-tier Areas Show Divides
Teheran-ro Office Vacancy Rates Take on a 'K-shaped' Pattern
"Offices Off the Main Road Face High Vacancy Rates"
The Growing Gap in Gangnam Office Market

Editor's NoteEven in Gangnam-gu, which is considered the epitome of skyrocketing real estate prices, there is another side to the story. The value of properties varies greatly depending on whether it is an apartment or not, and whether it is located in a central area. If a property is not a Gangnam apartment, which is regarded as the best residential area, it is difficult to even hear the sounds of children. While prime office spaces in central Gangnam are in high demand with companies eager to move in, office buildings slightly off the main thoroughfares experience soaring vacancy rates. The further one gets from top-tier locations such as Cheongdam-dong and Apgujeong-dong, the more sharply housing prices drop. As Gangnam-gu is a symbol of Korean real estate, it draws a lot of attention, but a closer examination reveals an uncomfortable truth of severe polarization. This article sheds light on the current landscape of the Gangnam real estate market, which is increasingly polarized toward both extremes.

A view of Teheran-ro, Gangnam-gu, Seoul. Photo by Yonhap News Agency

Building A, located about 100 meters from Exit 5 of Gangnam Station in Seoul, sits just off the main road. The 15-pyeong (approximately 49.5 square meters) office space inside has remained vacant for over a year. Although it targets small businesses, there have not even been any calls inquiring about leasing. A local real estate agent commented, "For office buildings directly on the main road near Exit 5 of Gangnam Station, there are no vacancies and inquiries for office space continue to come in," adding, "In contrast, for office spaces that are not on the main road, there are no companies looking to rent despite falling prices."

Even within Gangnam's commercial real estate market—known for its concentration of IT, financial, and other companies and reported chronic undersupply—polarization is emerging in core areas such as Teheran-ro. While large office buildings on the main road are in such demand that it's difficult to find available units, office buildings located just 5 to 10 meters off the main road are filled with vacant offices.

According to the commercial real estate advisory firm NAI Korea on May 25, the vacancy rate for prime offices along Gangnam-daero is only 0.72%. The Korea Real Estate Board reported that, as of the first quarter of this year, the office vacancy rate along Gangnam-daero was 4.1%. Excluding the large prime offices on the main thoroughfare, the vacancy rate for Gangnam-daero is likely even higher.

Jung Eunsang, head of the NAI Korea Research Center, stated, "Prime offices along Gangnam-daero are facing an extreme shortage of available space," adding, "Meanwhile, small buildings or aging offices on side streets are experiencing volatility due to tenant departures, resulting in ongoing polarization."

Gangnam-daero and the surrounding area of Teheran-ro are representative office districts in Gangnam. According to the Korea Real Estate Board, in the first quarter of this year, the office vacancy rate was 4.1% for Gangnam-daero and 4.8% for Teheran-ro. A representative of a local real estate agency near Gangnam-daero said, "There are a considerable number of small offices—8, 10, and 20 pyeong units—that are vacant," adding, "There are many cases where it takes over 18 months to find a tenant company."

Offices on side streets are generally less expensive than those on the main road. However, the gap is particularly pronounced in Gangnam due to the disproportionately high demand for prime buildings. A representative of a real estate agency on Gangnam-daero noted, "Large companies are unlikely to move into buildings off the main road, and small and medium-sized enterprises are increasingly leaving Gangnam altogether due to economic difficulties."

Jung Eunsang explained, "Startups and new companies in advanced industries such as IT are especially keen to be near large sources of capital like venture capital (VC) and private equity (PE) firms," adding, "Being located in Gangnam itself can be a strategic choice to establish a physical base for attracting investment and networking."

The Teheran-ro office area, which forms a major part of the Gangnam Business District (GBD), is no different. An industry insider remarked, "Many companies believe that having a good office improves their reputation and helps with recruiting employees," adding, "If they can't secure office space along Gangnam's main roads, there is growing demand to relocate to areas with many new buildings, such as Magok or Godeok-Gangil districts."

The polarization of office spaces in Gangnam is expected to intensify. This is because ongoing development is expected to significantly increase the supply of new office buildings. According to commercial real estate firm CBRE Korea, the GBD is experiencing expanded development due to the revision of the Teheran-ro district unit plan and the station area revitalization project last year. In a report, CBRE Korea stated, "With the highest floor area ratio (FAR) in Seoul at 1,800% being permitted and height restrictions being lifted, the transition of aging buildings into prime offices is being strongly encouraged." Additionally, the expansion of the GBD is expected to be significant, driven by development in the Seoripul Special Planning District of Seocho-gu and the Korea Real Estate Board site.

Kim Hyosun, Chief Real Estate Specialist at KB Kookmin Bank, explained, "The areas behind the GBD or on side streets are populated by many small buildings, making it difficult for large companies to locate there, and corporate demand is gradually declining due to factors such as remote work," adding, "There is a need for targeted support, such as designating areas specialized for certain industries and providing support through financing and other means."

This content was produced with the assistance of AI translation services.