2025 Korea Investors Intentions Survey

Commercial real estate investment activity in Korea is expected to remain robust in 2025. Numerous deals are currently in progress, with the office sector expected to witness especially robust activity. Commercial real estate transaction volume for the full year is projected to be similar to or slightly higher than the level achieved in 2024.

While approximately 79% of Korean respondents indicated they intend to increase or maintain their level of investment this year, showing relatively stronger buying intentions compared to investors in other markets, this is contingent upon a decline in borrowing costs due to interest rate reductions along with reasonable price adjustments.

Respondents identified the most significant challenge in the domestic investment market this year as the disparity in price expectations between sellers and buyers; a factor that could prolong the time it takes to complete transactions. While the overall funding environment is expected to improve from last year, investors are displaying heightened concerns regarding stringent bank loan approvals.

While offices have traditionally been domestic investors’ most preferred asset class, their popularity declined in this year’s survey due to liquidity shortages and oversupply concerns. Although prime logistics facilities remain keenly sought after, there has been a significant increase in interest for alternative sectors such as hotels, data centres, and co-living properties, driven by socio-structural change.

Amidst a continued liquidity shortage, investors’ preference for real estate debt funds with mid-risk and mid-returns slightly decreased this year, while demand for preferred equity investments increased. In the lending market, respondents displayed a strong preference for senior-secured investments, which emphasise stability. There was also more pronounced interest in mezzanine financing, which offers the potential for higher returns.

Should further interest rate cuts materialise this year, there could be downward pressure on yields, particularly for prime quality assets. However, a significant yield gap is expected depending on the nature and condition of assets. Consequently, the average yield for the overall market in 2025 is projected to remain at current levels, showing a stagnant trend for the time being.