- Transaction volume expected to exceed 10 trillion won, lower than 2019’s record but on par with five-year trend
- Public real estate investment and investment interest in niche sectors will grow
February 4, 2020 (Seoul, Korea) – CBRE Korea, a global commercial real estate service company, announced that according to its Real Estate Market Outlook 2020 report, Korean commercial real estate investment is expected to remain upbeat in 2020 with expected transaction volume exceeding 10 trillion won on the finalization of deals for major Grade A office buildings and logistics centres. Although total transaction volume in 2019 increased by 25% y-o-y to 16 trillion won, a record high, the forecast for 2020 is on par with the five-year average.
Don Lim, Managing Director of CBRE Korea, remarked, “Record low interest rates and global economic instability are leading individual investors to focus on alternative asset classes, including real estate. In addition, as the government is seeking to foster alternative public investment, public investment in real estate is poised to grow.” He continued, “Investment interest in logistics facilities, data centres and rental housing is set to grow further in 2020, supported by societal and economic shifts along with compressing yields for core assets.”
Outbound investment is expected to remain robust and megatrends driving interest in niche sectors will expand.
Claire Choi, Head of Research at CBRE, said, “In continuation of a trend witnessed in 2019, more new logistics supply this year will consist of mixed developments comprising dry and cold facilities. New logistics supply in 2020 is forecasted to rise to a record high due to projects coming on stream in the southern Great Seoul region of Icheon, Yongin and Anseong. Landlords of newly completed logistics facilities are offering longer rent-free periods, a previously uncommon practice. This trend shows the balance of power moving towards tenants.”
In the retail market, leading operators are investing in setting up ommnichannel platforms blending the best of physical and online commerce. It is expected that a more diverse range of offline store formats will emerge this year targeting the lucrative the content-driven social media generation (Millennials) and video-driven generation (Generation Z).
Office
About 730,000 sq.m. of new Grade A office supply will be completed this year, an increase of almost 300% y-o-y. This will drive a short-term jump in vacancy in the Central Business District (CBD) and Yeouido Business District (YBD), while also pushing up citywide vacancy. Steady expansion by IT, financial and professional services firms due to upgrade and consolidation demand will ensure net absorption remains stable y-o-y at 350,000 sq.m. Average effective rents in the CBD and Gangnam Business District (GBD) are forecasted to increase but YBD’s figure is expected to fall, so overall effective rents are expected to remain relatively stable in 2020.
Retail
As omnichannel adoption accelerates, a more diverse range of store formats is expected in 2020. Large experiential stores, specialist stores, bigger retail arcades and digital stores will become more prominent. Second high streets will remain sought after by retailers, along with the rise of once prosperous retro high streets such as the Euliro district, Munrae ironworks district and Seongsu-dong district. Traditional retailers will continue to introduce a variety of initiatives to boost sales, primarily by introducing new brands and redesigning floor plans.
Logistics
New logistics supply in 2020 is forecasted to rise to a record-high 2.0 million sq.m. gross floor area (GFA), the bulk of which will come onstream in the southern area of Icheon, Yongin and Anseong. Some newly competed logistics facilities are taking longer to fully lease up, primarily because of their large size as well as the current oversupply situation. The logistics market is expected to change as the balance of power leans towards tenants with such changes as offers of longer rent-free periods. Additionally, experienced investors are now engaging in development projects and outbound logistics investment.
Capital Markets
Korean commercial real estate transaction volume is expected to exceed 10 trillion won, which is lower than 2019’s record number, but nevertheless on par with the five-year average. Record low interest rates and global economic instability are likely to lead individual investors to focus on alternative asset classes, including real estate. Especially, Real Estate Investment Trust (REIT) products are emerging as increasingly attractive investment options with the government introducing active measures such as tax benefits. Outbound investment is expected to remain robust and investment interest in logistics facilities, data centres and rental housing is poised to grow further in 2020.
- Public real estate investment and investment interest in niche sectors will grow
February 4, 2020 (Seoul, Korea) – CBRE Korea, a global commercial real estate service company, announced that according to its Real Estate Market Outlook 2020 report, Korean commercial real estate investment is expected to remain upbeat in 2020 with expected transaction volume exceeding 10 trillion won on the finalization of deals for major Grade A office buildings and logistics centres. Although total transaction volume in 2019 increased by 25% y-o-y to 16 trillion won, a record high, the forecast for 2020 is on par with the five-year average.
Don Lim, Managing Director of CBRE Korea, remarked, “Record low interest rates and global economic instability are leading individual investors to focus on alternative asset classes, including real estate. In addition, as the government is seeking to foster alternative public investment, public investment in real estate is poised to grow.” He continued, “Investment interest in logistics facilities, data centres and rental housing is set to grow further in 2020, supported by societal and economic shifts along with compressing yields for core assets.”
Outbound investment is expected to remain robust and megatrends driving interest in niche sectors will expand.
Claire Choi, Head of Research at CBRE, said, “In continuation of a trend witnessed in 2019, more new logistics supply this year will consist of mixed developments comprising dry and cold facilities. New logistics supply in 2020 is forecasted to rise to a record high due to projects coming on stream in the southern Great Seoul region of Icheon, Yongin and Anseong. Landlords of newly completed logistics facilities are offering longer rent-free periods, a previously uncommon practice. This trend shows the balance of power moving towards tenants.”
In the retail market, leading operators are investing in setting up ommnichannel platforms blending the best of physical and online commerce. It is expected that a more diverse range of offline store formats will emerge this year targeting the lucrative the content-driven social media generation (Millennials) and video-driven generation (Generation Z).
Office
About 730,000 sq.m. of new Grade A office supply will be completed this year, an increase of almost 300% y-o-y. This will drive a short-term jump in vacancy in the Central Business District (CBD) and Yeouido Business District (YBD), while also pushing up citywide vacancy. Steady expansion by IT, financial and professional services firms due to upgrade and consolidation demand will ensure net absorption remains stable y-o-y at 350,000 sq.m. Average effective rents in the CBD and Gangnam Business District (GBD) are forecasted to increase but YBD’s figure is expected to fall, so overall effective rents are expected to remain relatively stable in 2020.
Retail
As omnichannel adoption accelerates, a more diverse range of store formats is expected in 2020. Large experiential stores, specialist stores, bigger retail arcades and digital stores will become more prominent. Second high streets will remain sought after by retailers, along with the rise of once prosperous retro high streets such as the Euliro district, Munrae ironworks district and Seongsu-dong district. Traditional retailers will continue to introduce a variety of initiatives to boost sales, primarily by introducing new brands and redesigning floor plans.
Logistics
New logistics supply in 2020 is forecasted to rise to a record-high 2.0 million sq.m. gross floor area (GFA), the bulk of which will come onstream in the southern area of Icheon, Yongin and Anseong. Some newly competed logistics facilities are taking longer to fully lease up, primarily because of their large size as well as the current oversupply situation. The logistics market is expected to change as the balance of power leans towards tenants with such changes as offers of longer rent-free periods. Additionally, experienced investors are now engaging in development projects and outbound logistics investment.
Capital Markets
Korean commercial real estate transaction volume is expected to exceed 10 trillion won, which is lower than 2019’s record number, but nevertheless on par with the five-year average. Record low interest rates and global economic instability are likely to lead individual investors to focus on alternative asset classes, including real estate. Especially, Real Estate Investment Trust (REIT) products are emerging as increasingly attractive investment options with the government introducing active measures such as tax benefits. Outbound investment is expected to remain robust and investment interest in logistics facilities, data centres and rental housing is poised to grow further in 2020.
Disclaimer:
Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
