Rent-Seeking by Rent Concession: An Analysis of Rent-Free Periods in the Seoul Office Market

Abstract

Rent-free periods (RFPs) have been used in property markets worldwide especially during economic downturns as a discount pricing strategy in marketing. However, this research study proposes that RFPs play a role in increasing or, at least, sustaining face rent that can be reflected in the property price. This study focuses on the Korean office market which has experienced growing vacancy rates since the global financial crisis possibly leading to a decrease in effective rent with greater RFP incentives. In this period, face rent has increased as offering extended RFPs. Hence, high vacant rates with high face rent have been observed, which is seemingly contradictory against the commonly known..