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The Rent Adjustment Mechanism in Seoul Office Market

KIM, Kyung-MIn 1 Park Jungsoo 2

1서울대학교
2코람코자산신탁

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ABSTRACT

Natural vacancy rate, defined as a vacancy rate at equilibrium, has explanatory power in rent adjustment process. The estimation of natural vacancy rate for Seoul office market, however, is not figured out yet. In this venue, the study aims to 1) estimate natural vacancy rate of Seoul office market and 2) find rent adjustment process with excess vacancy. Using quarterly dataset since 1994, major findings are summarized as follows. First, there is an intertemporal variation in the natural vacancy rate of Seoul office market. If planned mega projects and/or office buildings in Seoul metropolitan area are delivered on time, the natural vacancy rate of Seoul office market after 2014 will be quite different comparing with the current one. Second, excess vacancy and real rent show negative correlation, confirming the existence of rent adjustment process. The last but not least, rental adjustment parameter falls into a range of 0.22 to 0.25. It implies that 1%point increase in excess vacancy will lead to 0.22~0.25% decline in real rent quarterly.

Citation status

* References for papers published after 2022 are currently being built.