[RSQUARE] 2025 Industry Economic Trends_ENG

Leasing Market Trend Report Leasing Market Trend Report Industry Economic Trends and Trend of Leasing Market Opening Amid the prolonged global economic uncertainty in recent years, Korea’s office leasing market has undergone a series of notable changes. The persistence of high interest rates, companies’ efforts to reduce costs, and the establishment of digital transformation and hybrid work systems have fundamentally reshaped the traditional structure of office demand These macroeconomic shifts have significantly influenced corporate management strategies across industries, leading to a stronger focus on cost reduction and operational efficiency. As a result, companies are downsizing their workforce or considering relocation to reduce leasing expenses. Moreover, domestic companies are increasingly evaluating lease targets by taking into account not only lease terms but also factors such as NOC (Net Operating Cost) fluctuations, surrounding development environments, and geographic advantages. Consequently, more tenants are seeking relocation opportunities outside of Seoul’s prime office districts. This trend reflects tenants’ strategic choice to enhance space flexibility and optimize cost management. It also signals the emergence of a new competitive landscape in the leasing market amid the combined effects of increased office supply and an economic downturn. This report examines the current economic conditions of Korea’s industries and recent trends in the office leasing market, while exploring potential strategic directions for the future. Major Industry Labor Market Economic Trends and Labor Market by Industry 18% Vacancy rate_% Unemployment rate_% No. of employees_in Thousands(Right)

Labor Market

Labor market rigidity is intensifying, with uncertainty remaining high Source : RSQAURE, Korean Statistical Information Service Employment Status and Cyclical Change Trends

Coincident Composite Index

The leading index rose slightly above 100 in the first half of 2023, raising expectations for an economic recovery. However, the coincident index has continued to decline since the second half of 2023, indicating ongoing weakness in current economic activity. Seoul Office Vacancy Rate & Employment Overview Vacancy Rate & Employment Market In Q1 2025, the vacancy rate, which had increased due to new supply from One Grove and K Square, has recently shown a slight decline. Employment growth has slowed, displaying an inverse relationship with the vacancy rate, while the unemployment rate remains stable at around 3%. Number of Office Workers Considering the decline in the proportion of remote and hybrid work, the actual number of employees commuting to offices is likely to increase. While the number of office workers in Seoul has continued to grow, it has recently plateaued at around 3 million. *Leading Index: Cyclical Component is an investment-related indicator used to forecast short-term turning points and phases of the business cycle. ** Coincident Index: Cyclical Component reflects indicators from both the supply and demand sides—such as manufacturing, services, and retail—and is used to assess the current phase and turning points of economic activity. Unit: (Number of Employees) Persons Flexible Work Arrangement Usage 16,000 16,500 17,000 17,500 18,000 18,500 19,000 19,500 20,500 21,000 Leading Composite Index* Coincident Compostie Index** No. Workers(in Thousands) 1,000 1,500 2,000 2,500 3,000 3,500 35% 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 No. of Office Workers in Seoul_in Thousands(Right) Proportion of Using FWA_% Proportion of Work from Home_% i Index: Cyclical Component* i nt Index: Cyclical Component** umber of Employees (thousand) Rate (%) n l Rate (%) Employ ent (Thousand, Right) umber of Office Workers in Seoul (thousand, right) Utilizati Rate (%) Telecommuting, Remote Work Utilization Rate (%) Production Index by Industry Sales Performance BSI Labor Conditions BSI Employment Growth Trend

Production Index

The production index remains on an upward trend, but construction output has dropped sharply, leading to weaker sales and a decline in employment.

Sales Performance BSI

Overall sales performance remains weak, while the ICT sector has recently shown growth, which is expected to support future employment expansion in the industry.

Employees by Industry

Industry-wide growth has slowed, rising construction costs and the broader economic downturn have led to declining employment in construction and retail sectors since 2024. Based on 2020 = 100 Threshold = 100; below 100 indicates slowdown, above 100 indicates expansion Threshold = 100; below 100 indicates labor shortage Based on Jan 2018 = 100.0 Reflects cumulative growth/decline from the 2018 baseline Economic Trends by Industry Overall industrial productivity and sales performance have slowed, while growth in the construction sector remains weak

Labor Conditions BSI

Manufacturing shows signs of recovery, but other sectors continue to face labor shortages. As technological development drives growth in the IT sector, labor demand and employment in information and communications are likely to expand. Professional, Scientific and Technical Services

Wholesales and Retail

20.3Q 20.4Q 21.1Q 21.2Q 21.3Q 21.4Q 22.1Q 22.2Q 22.3Q 22.4Q 23.1Q 23.2Q 23.3Q 23.4Q 24.1Q 24.2Q 24.3Q 24.4Q 25.1Q 25.2Q Employment Status_Seoul Employment Forecast_Seoul Operating Income_Seoul Operating Income Forecast_Seoul Ordinary Income and Employment Conditions Number of Corporate Entities and Growth Rate

Ordinary Income

Ordinary income has been declining steadily since its post–Q4 2021 stagnation. Despite a more positive outlook compared to actual results, a significant recovery is not expected.

Employment Conditions

Employment remains stagnant with no signs of recovery. Outlook levels also show little improvement, indicating limited optimism. The number of corporate entities has continued to rise, but growth has slowed since 2020, reaching only 2.2% in 2024. Given the economic slowdown and weak outlook for ordinary income and employment, the number of corporate entities is likely to plateau or decline going forward. Ordinary income has declined due to the economic downturn, weakening the labor market Based on the previous quarter = 100: values above 100 indicate improvement (increase), while values below 100 indicate deterioration (decrease) 150,000 250,000 No. of Corporates(Left) Growth rate of No. of Corporates_%(Right) loyment Conditions (Seoul) ployment Outlook (Seoul) rdin ry Income (Seoul) rdin ry Income Outlo k (Seoul) (count) Corporate Entity Growth Rate (%) 5,000 7,000 9,000 11,000 13,000 15,000 17,000 19,000 21,000 23,000 25,000 p ) Order Volume_in billion won Payment Volume of Completed Work_in billion won Construction Market Index and Employment Trends Construction Market & Employment The index has fallen for four consecutive months, and employment conditions have weakened accordingly. Orders and Construction Progress Payments Although the number of corporate entities continues to grow, the growth rate has declined for three consecutive years since 2021, dropping to 2% in 2024. This slowdown suggests that employment conditions in the construction sector are likely to weaken further. Index: Based on 100, values above 100 indicate an optimistic outlook; values below 100 indicate a

pessimistic outlook

Employment figures: Data for the number of employees in August 2025 has not yet been released Construction Progress Payment: Refers to the construction costs received in installments by contractors based on the progress rate over a given period Decline

Construction Corporation Trend

Construction sector shows signs of contraction amid rising concerns over an economic slowdown Orders and Construction Payments Since entering a downturn in September 2022, the construction market has faced increasing operational pressures across the industry. Construction payments have also failed to recover to previous levels as of 2024, indicating a high likelihood of further slowdown. These financial constraints are expected to negatively affect the labor market 80,000 120,000 140,000 160,000 Number of Corporates(Left) Growth_%(Right) 1,850 1,875 1,900 1,925 1,950 1,975 2,000 2,025 2,050 2,075 2024.10 2024.11 2024.12 No. of Employees_in Thousands(Right) Construction Business Survey Index(Left) Construction Orders (KRW 100 billion) mposite Econom c Sentiment Index (left) Construction Progress Paymen s (KRW 100 billion) (count) Corporate Entity Growth Rate (%) -1,000,000 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 은행 증권사 보험사 자산운용사 신탁사 카드사 캐피탈 저축은행 2018 2019 2020 2021 2022 2023 2024 2025 Source : KOSIS (Korean Statistical Information Service), Financial Supervisory Service (FSS) Net Income Trend in Finance and Insurance Trend in the Number of Financial and Insurance Corporations

Net Income

Since 2023, non-bank financial and insurance institutions have seen net income decline due to reduced profitability amid the downturn. Insurance Net income in the insurance sector fell by 16.7% YoY (as of March) due to higher auto insurance loss ratios and rising loss-sharing costs among life insurers. The growth rate of corporate entities rebounded to 2.4% in 2024 but remains relatively low. Based on net income for Q1 of each year (as of end-March) Unit: KRW million Stagnation Stagnation StagnationDecrease Net income shows little room for recovery, while entity growth is slowing 10,000 30,000 Finance, Insurance and related Services_Persons(Left) Growth_%(Right) inancial and Insurance Services Corporations (count, left) rowth Rate % (right) Trend in Number of Corporate Entities Total Employment in AI Companies The number of corporate entities has continued to rise since 2018, and growth is expected to persist. As of 2024, the sector shows a relatively solid growth rate in the 4% range, compared with less than 3% in other industries. However, the overall trend remains downward.

Sales and Employment

Sales and employment in AI companies have continued to grow since 2020, but the pace of increase is slowing. Driven by accelerated digital transformation and advancements in AI, cloud, and big data, the sector remains relatively positive in terms of job creation compared with other industries. However, both sales growth and employment expansion are showing signs of deceleration. Unit: persons (left), KRW million (right)

Information and Communications

The number of entities, sales, and employment continue to grow steadily, though the pace of increase is moderating Unit: KRW million Source : KOSIS (Korean Statistical Information Service) , Software Policy Research Institute (SPRI) 10,000 30,000 70,000 80,000 90,000 No. of Businesses_(Left) Growth_%(Right) - 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 400,000 420,000 440,000 460,000 480,000 520,000 2020 2021 2022 2023 2024(p) No. of Workers (Left) Total Revenue_Million won(Right)Information & Communication Corporations (count, left) th Rate % (right) Employees Revenu 10Source: 2025 H1 Venture Investment & Fund Formation Press Release, Ministry of SMEs and Startups, Venturein Venture Investment & Fund Formation Overview Venture Business Performance & Outlook Index Fund Formation & Performance Compared to the same period last year, both venture investment volume and fund formation increased. However, the number of investee companies declined, indicating more concentrated investments. Firms that do not secure funding are expected to reduce their workforce. Performance & Outlook Index Venture companies maintain a positive business outlook through Q3 2025, but workforce outlook remains below 100, indicating continued concerns over labor conditions. Number of Venture Companies The number of venture companies across major regions, including Seoul, is generally declining as investments become concentrated in a smaller group of firms. However, investee companies are expanding their hiring, so the total number of employees in the sector is expected to remain relatively stable. Performance & Outlook Index: Based on a previous-quarter benchmark of 100, values above 100 indicate improvement or expansion, while values below 100 indicate deterioration or contraction Category ‘23 1H ‘24 1H ‘25 1H YoY Investment Amount 44,930 54,856 56,780 +3.5% Average

Investment per Company

24.5 23.0 29.9 +29.7%

Number of Investee Companies 1,831 2,382 1,901 -20.2% Fund Formation Amount 47,013 51,662 61,681 +19.4% Number of Newly Formed Funds 370 409 358 -12.5% Venture Company Distribution by Seoul Region

단위: 개, %

Seoul Region

2022 Share 2023 Share 2024 Share (Aug) Share 10217 100% 11852 100% 11127 100% 10825 100% CBD Total 539 5% 635 5% 617 6% 586 5% Jung-gu 324 3% 369 3% 353 3% 336 3% Jongno- 215 2% 266 2% 264 2% 250 2% GBD Total 3334 33% 3847 32% 3592 32% 3489 32% Gangna m-gu 2312 23% 2678 23% 2524 23% 2489 23% Seocho- 1022 10% 1169 10% 1068 10% 1000 9% YBD Total 1371 13% 1605 14% 1531 14% 1486 14% Mapo- 748 7% 862 7% 804 7% 761 7% Yeongd eungpo- 623 6% 743 6% 727 7% 725 7% Others Total 4973 49% 5765 49% 5387 48% 5264 49% Geumch eon-gu 1279 13% 1415 12% 1285 12% 1246 12% Seongd ong-gu 744 7% 870 7% 858 8% 848 8% Guro-gu 610 6% 705 6% 596 5% 577 5% Songpa- 629 6% 715 6% 691 6% 691 6% Gangseo -gu 405 4% 457 4% 431 4% 440 4% Others 1306 13% 1603 14% 1526 14% 1462 14%

Venture Investment

Venture funding is growing, while the number of firms is decreasing Unit: 100 million KRW 60.0 80.0 100.0 120.0 140.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2024 2025

Management Performance

Management Performance Forecast Human Resorce Performance Human Resorce Forecast Business P rformance (Actual) Business P rformance (Outlook) Employment Conditions (Actual) Employment Conditions (Outlook)

Tenant Relocation Trends

Relocation Patterns by Region and Tenant Preferences Vacancy Absorption vs. New Vacancies E-NOC & Vacancy Rate Recent office supply increases in areas such as Magok, combined with slower employment growth, have pushed vacancy rates higher and slowed NOC growth. The gap in NOC between large and mid-sized buildings has widened compared to Q4 2022. With significant new office supply scheduled, vacancy rates are expected to rise further, while NOC growth will likely remain limited. Vacancy Absorption & New Vacancies Since 2021, net absorption has been declining, but it increased again in Q2 2025, reaching approximately 56,000 m². Considering overall market trends, it is still difficult to view this as a full recovery phase. However, both vacancy absorption and newly generated vacant space are on the rise, indicating increased tenant relocation activity. Net income as of March (end of Q1 each year) E-NOC & Vacancy Rate Trends Vacancy Absorption & New Vacancies: Change in absorbed and newly created vacant space (m²) compared to the previous quarter *Net Absorption: Calculated based on the previous quarter as Vacancy Absorption minus New Vacancies Seoul Leasing Market Overview Rising vacancy rates are slowing rent growth 150,000 250,000 350,000 20.1Q 20.3 21.1 21.3 22.1Q 22.3 23.1Q 23.3 24.1Q 24.3 25.1Q Large Size Office Vacancy Rate_%(Left) Mid Size Office Vacancy Rate_%(Left) Large Size Office E-NOC_in won(Right) Mid Size Office E-NOC_in won(Right) -300,000 -200,000 -100,000 -700,000 -500,000 -300,000 -100,000 700,000 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2021 2022 2023 2024 2025 Vacancy Area Resolved_m²(Left) Newly Vacancy Area_m²(Left) Net Absorption Area(QoQ)_m²(Right)* arge Corporations cancy Rate % (left) arge Corporations -NOC (r ght) SME Vacancy Rate % (left) SME E-NOC (r ght) acancy Absorption (m², left) ew Vacan ies (m², l ft) et Absorption vs. Previous Quarter (m², right) Large Office Vacancy Rate Large office vacancy rates in the CBD and GBD remain lower than the overall market average. In the GBD, the vacancy rate declined quarter-over-quarter, reaching a favorable level in the 1% range. In contrast, the “Other Seoul” areas saw vacancy rates rise due to new supply in districts such as Gangseo (Magok), including buildings like One Grove and K-Square. 1Q 1Q 400,000 600,000 700,000 800,000 Seoul / Bundang Office Vacancy Rate Seoul Office Vacancy Rate Overall vacancy rates have been trending upward recently. As of Q2 2025, YBD recorded the lowest rate at 2.68%. Excluding the “Other Seoul” areas, all major districts reported vacancy rates below 5%. Large Office Vacancy Rate Seoul / Bundang Supply & Upcoming Supply

Upcoming Supply

Future office supply in Seoul is expected to be concentrated in central districts. In Q2 2029, large-scale projects are scheduled for completion in the Seosomun and Seoul Station areas, followed by additional major office completions in Gayang-dong and Jangjidong in Q3. As a result, vacancy rates are likely to rise. Unit: py

Office Vacancy Overview

Slower employment growth and rising supply are driving vacancy rates upward

Annual Average

Relocation Share Demand Relocation Trends (‘22–’23) Demand Relocation Trends (‘24–’25 1H)

Relocation Share

Moves to Other Seoul areas increased the most, with relocations to the metro region and other provinces also rising. In contrast, relocations to core districts and Bundang/Pangyo declined, indicating a stronger shift toward Seoul Others and non-Seoul regions.

Demand Relocation Trends

In 2024–25 1H, the share of tenants relocating within the same district increased compared with 2022–23, while moves to other core districts declined—likely reflecting hesitance to relocate amid ongoing economic uncertainty. During the same period, relocations from “Seoul Others” to the metro region and provincial areas rose significantly, suggesting a stronger focus on cost reduction.

Tenant Relocation

Relocations both within the same area and to other regions have increased 21.5% 14.1% 42.3% 45.0% 6.2% 3.4% 17.6% 27.8% 8.8% 4.2% 3.6% 5.5%

CBD GBD

YBD Other Regions in Seoul Bundang/Pangyo Metropolitan and Other Regions To C To G To Y To O in S eoul

To B

undang/P angyo To M etro polita n/O

er R egions

Within the Same Region Other Main Districts Others in Seoul Bundang/Pangyo Metropolitan/Other Regions To C To G To Y To O in S eoul

To B

undang/P angyo To M etro polita n/O

er R egions

Within the Same Region Other Main Districts Others in Seoul Bundang/Pangyo Metropolitan/Other Regions Gr ater Metropolitan / R gional Areas Same District Greater Metropolitan / Regional Areas er Core Business Districts dang / angyo Same District Greater Metropolitan / Regional Areas r Core Business Districts ng / yo Relocation Outcomes by Major Industry Relocation Share by Industry Relocation shares increased in Construction, Education Services, and Transportation/Warehousing, while most other sectors declined. The IT sector dropped from 34.8% in 2022–23 to 16.0% in 2024–25 1H. Finance/Insurance also decreased from 14.1% to 10.9%. Tenant Relocation Share by Major Industry Except for Manufacturing, all industries saw an increase in relocations to Other Seoul areas compared with 2022–23. Relocations to the CBD and YBD declined across most industries, except for Professional/Scientific/Technical Services. In contrast, relocations to the GBD increased in nearly all sectors, making it the only one of the three major districts to record a rise in relocation share. Share of Relocating Tenants Relocation Trends by Industry Relocations to Other Seoul areas increased, while moves to the CBD declined 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% '24-'25.1H '22-'23 Construction Education Finance/Insurance Others Wholesale/Retail Business Facility Management/ Support/Rental Accomodation/Food Transportation/Logistics Professional/Science/Tech Information/Communication/Tech Manufacturing '22-'23 '24-'25.1H '22-'23 '24-'25.1H '22-'23 '24-'25.1H '22-'23 '24-'25.1H '22-'23 '24-'25.1H '22-'23 '24-'25.1H Construction Finance/Insurance Manufacturing ICT Professional/Science/Tech Wholesale/Retail CBD GBD YBD Other Regions in Seoul Bundang/Pangyo Metropolitan and Other RegionsSeoul Others Greater Metropolitan / al Areas / Pangyo GBD CBD YBD 분당/판교 서울기타 수도권·지방 Preference Across the Four Major Districts Across all industries, tenants most preferred relocating to Other Seoul areas. Among the four core districts (including Bundang), industries such as Finance/Insurance, IT, Professional/Scientific/Technical Services, and Construction showed a stronger preference for the GBD. In contrast, Accommodation/Food Services and Transportation/Warehousing preferred the CBD. Some preference for Bundang/Pangyo and the metropolitan/provincial regions was also observed. Compared with 2022–23, relocation preference declined across all areas except Other Seoul in 2024–25 1H. Among Seoul’s three major districts, the GBD remains the most preferred. Preference for relocating to Other Seoul increased significantly, while preference for the metro/provincial regions declined. Industry Preference Across the Four Major Districts Data calculated based on 2024–25.1H.

Decrease Decrease

Preference for major districts declined, while preference for Other Seoul areas increased Constru ctio n Educatio n Finance/In sura nce Oth W holesale/R eta il Facilit y…

Accom m odatio

n/F ood Tra nsp orta tio n/L ogist ics Pro fe ss ional/S cience/T ech IC T M anufa ctu rin g GBD CBD YBD Bundang/Pangyo Other Areas in Seoul Metropolitan/Other RegionsSeoul Oth rs Gr ater Metropolitan / al Areasang / gyo 59% 29% 13% 51% 33% 증평 이전 감평 이전 면적 유지 Tenant Upsizing/Downsizing Move Tenant Upsizing/Downsizing Moves The share of tenants relocating to larger spaces decreased, while the share relocating to smaller spaces increased. Building Size Before vs. After Relocation Building Size Before vs. After Relocation The larger the building size, the greater the decline in relocation share. Compared with 2022–23, relocations to large and mid-sized buildings decreased in 2024–25. Changes in Relocation by Building Size and Leased Area Relocations involving upsizing into large and mid-sized buildings decreased, while downsizing into small buildings increased. This suggests that future flight-to-quality behavior may vary depending on building size and space requirements. Relocation Trends by Size & Area Based on post-relocation building type *Shares are based on relocation outcomes and calculated as proportions of all cases in each year Leased Area Consumption Patterns Both the share of downsizing and relocations to smaller offices increased 26% 22% 11% 67% 22-23 24-25.1H

Large Mid Small

20% 15% 8% 6% 8% 9% 27% 33% 24% '22-'23 '24-'25.1H '22-'23 '24-'25.1H '22-'23 '24-'25.1H

Large Mid Small

Relocation with Expension Relocation with Downsizing Retaining Leased AreaLarger Size Smaller Size Same Size Closing Since the second half of 2023, Korea’s coincident index has trended downward, signaling an economic slowdown. While the number of corporate entities and employees remains relatively stable, weakening business conditions and slowing growth are tightening the overall employment and demand environment. Construction firms, in particular, face rising project costs and financial strain, and declining sales across industries may negatively affect office demand. As of Q2 2025, vacancy rates in Seoul’s core districts remain below 5%, but the overall upward vacancy trend and rising operating costs suggest shifting tenant preferences and increasing challenges in tenant acquisition. Upcoming large-scale office supply—coupled with construction delays—will likely push vacancy rates gradually higher, with a more notable rise expected after 2027. Tenant relocation patterns show a rising preference for moves within the same district, alongside growing migration toward non-core areas of Seoul. Movement from these non-core areas to the greater metropolitan region and other provinces is also becoming more visible. At the same time, relocations into large and medium-sized buildings have declined, while moves involving reduced floor area have increased, reflecting a stronger emphasis on efficiency and cost savings. As a result, the traditional “flight to quality” trend is expected to weaken. Overall, economic uncertainty, financial pressure on firms, and substantial upcoming supply are driving more diverse relocation patterns beyond the core districts. Landlords will need more refined strategies such as targeted incentives and an emphasis on structural and locational advantages to stay competitive in the evolving market. Research Center Associate Manager Research Center steven6ko@rsqaure.co.kr

Kyu-Jeong Choi RSQUARE

LF 241, Wangsimni-ro, Seongdong-gu, Seoul Real Estate Services and Other Inquiries info@rsquare.co.kr Brokerage sales@rsquare.co.kr

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