Foreign investment in the Korean commercial real estate market reached an estimated US$1.9 billion in 2020, down 24% y-o-y from 2019. The decline in cross-border investment was primarily due to the impact of travel restrictions and other measures to contain the spread of COVID-19. Intense competition from domestic buyers, which continue to be supported by abundant liquidity, also inhibited acquisitions by overseas investors.
Many foreign investors nevertheless continue to pursue investment opportunities in Seoul, with 2020 witnessing the completion of several major office and logistics deals. Asian capital accounted for 59% of total foreign commercial real estate investment last year, followed by the U.S. (25%) and Europe (16%).
Travel restrictions and an inability to perform onsite due diligence weighed on Korean outbound real estate investment for much of 2020, with full-year transaction volume falling 39% y-o-y to US$6.3 billion, ending three consecutive years of growth.
Despite these obstacles, Korean investors retained a strong appetite for overseas acquisitions in 2020, with deal flow picking up gradually in the second half of the year. Investment in the U.S. rose substantially from 2019 as the Korean won’s lower hedging costs against the U.S. dollar lured investors to this market. Yield compression in Europe also prompted many Korean buyers to reorient portfolios towards the U.S.