“They said, ‘We’ll lease the whole building for 10 years’ - then came the shock... Seoul CBD offices hit by public agency relocations [Real Estate A to Z]”

Jongno and Jung districts account for 44% of employees in scope
Blue-chip tenant once expected to stay for 10 years
Five-year exit makes a premium discount inevitable
Law-firm hubs Gwanghwamun and Jongno also face fallout

The government’s plan to relocate ministries and public institutions to regional areas has emerged as a new variable for the office market in central Seoul. It is now uncertain whether buildings leased by government agencies will continue to generate rental income after their leases expire. Some observers say that if financial regulators also relocate, demand for local offices from law firms with substantial government relations work could increase.

According to Realytics, a commercial real estate information provider, the full relocation of 125 public institutions in Seoul, which had 69,005 employees as of 2025, could create as much as approximately 313,700 pyeong of vacant office space in Seoul, equivalent to 2.54% of the market. Realytics estimated that each employee would require approximately 4.55 pyeong of gross floor area, based on 2.5 pyeong of usable space per person and an average office net-to-gross ratio of 55%. Even assuming that only 60% of the employees relocate, approximately 188,200 pyeong of office space, or 1.53%, would be left vacant.

The impact is expected to be concentrated in the central business district (CBD), including Jongno and Jung districts. That is because 30,744 employees at 31 institutions, or 44.6% of the total workforce covered by the plan, are concentrated in this area. Under a scenario in which all institutions in the CBD relocate, 140,000 pyeong of office space would become vacant there alone, equivalent to 5.3% of the district’s total office area of 2.64 million pyeong.

A Realytics official said, “In the CBD, the departure of public institutions could coincide with new office supply, doubling the vacancy burden compared with other districts.” The official added, “Once the institutions and relocation schedules are confirmed, it will be necessary to assess the impact down to the individual building level, taking into account whether each institution owns or leases its headquarters and how much space it actually uses.” The analysis represents the maximum potential impact, based on the assumption that all employees listed in the “total number of employees” disclosed on ALIO, the Public Institution Management Information Disclosure System, work at their institutions’ Seoul headquarters.

The relocation of public institutions is also being cited as a factor to consider in the sale of office buildings in central Seoul. Renais Square in Jung district, Seoul, is a case in point. After its sale fell through once in May, the building secured a lease for the entire property with the Major Crimes Investigation Agency under terms of an initial five-year lease followed by a five-year extension, and the sale process resumed in August. However, the government’s announcement on September 3 that the agency was among those slated to relocate to Sejong has introduced uncertainty. Industry sources say the seller is hoping for a price of more than KRW 700 billion. Others estimate a likely transaction price of around KRW 670 billion to KRW 680 billion, taking the yield into account.

The relocation announcement has created the possibility that a blue-chip tenant, previously expected to stay for 10 years, could leave after just five, making a discount to the premium unavoidable. Industry sources say that if the lease is not extended or the leased area is reduced, the landlord may have to compete for tenants with new office buildings coming onto the market around the time the lease expires. An industry source in commercial real estate said, “There is a substantial difference in asset valuation between a 10-year lease and a five-year lease.” The source added, “Having a tenant whose departure is all but certain in five years is a burden for a prospective buyer, so the premium could be discounted.”

Large offices in Gwanghwamun and Jongno are mainly leased by law firms and related businesses with substantial government relations work. Kim & Chang has offices in the Gwanghwamun area, including in SeYang, Jeokseon Hyundai, Northgate, Centerpoint, Crescendo, and Jeongdong Building, while Shin & Kim occupies D Tower and Grand Seoul in Jongno district. Bae, Kim & Lee is based in Centropolis in Jongno district, and Lee & Ko is located in Hanjin Building in Jung district. Industry sources say that further relocations by key government ministries could diminish some of the advantages of central Seoul locations close to government agencies. If financial regulators also move to Sejong, large law firms will have greater incentive to station regulatory advisory and government relations specialists there.

A lawyer at a large law firm said, “If the Financial Supervisory Service, the direct regulatory authority, relocates to Sejong, rather than the Financial Services Commission, which sets policy, law firms will consider setting up local branch offices or smart offices, particularly for financial regulatory advisory and government relations work.” Centerpoint Gwanghwamun, where Kim & Chang agreed to lease 80% of the total area through 2031, changed hands in October 2025 for KRW 432 billion, one of the highest prices in the district. Stable rental income was the basis for the acquisition, as Kim & Chang holds an option to extend the lease for another 10 years. An investment banking (IB) industry source said, “At the time of the transaction, people were saying that relocating government offices would not be as easy as it sounded.” The source added, “If the possibility of an extension after 2031 becomes uncertain, the calculation of long-term rental income itself changes.”

In regional office markets where public institutions relocating from the Seoul metropolitan area are setting up, private companies that do business with those institutions are generating demand for new offices. In Jeonbuk Innovation City in Jeonju, the regional office market has benefited from the relocation of the National Pension Service’s Fund Management Headquarters in 2017, after which domestic and international asset managers entrusted with managing its funds opened offices one after another. An IB industry source said, “Because performance differences among the asset managers are not significant, the evaluation item ‘maintaining a Jeonju branch and staff’ effectively determines who wins or loses, prompting a rush to set up offices in Jeonju.” The source added, “The National Pension Service’s fund reserves are projected to grow from around KRW 1,500 trillion this year to approximately KRW 1,900 trillion in 2030, so asset managers will continue moving to Jeonju.”

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