Real estate investors drift away from Seoul, toward logistics
Real estate investors looking for deals in South Korea turned their attention away from the capital, Seoul, in the first quarter of 2021 as demand for logistics goods spiked, data showed Thursday.
Commercial real estate deals closed in Seoul with tickets valued at over $ 10 million in the first quarter totaled $ 2.2 billion, a 25.8 percent year-over-year decrease while investments in Other parts of Korea rose 3 percent to $ 2.6 billion, according to New York-based capital markets firm Real Capital Analytics.
Seoul’s share of all nationwide investments in the first quarter was 45.1 percent after 53.3 percent in the previous year.
This trend is due to changed investor preferences during the pandemic, according to the RCA.
For example, mid-to-large businesses in the first quarter, including the acquisition of five fulfillment centers in southeastern Greater Seoul by Singapore-listed Mapletree Logistics Trust for $ 250 million, boosted the numbers for transactions outside of Seoul .
The appetite of foreign investors for real estate outside of Seoul – also in up-and-coming logistics cluster cities like Icheon and Yongin – is growing steadily. Seoul’s share of inbound investments was 44 percent in the first quarter, a clear contrast to 79 percent in the twelve-month follow-up period.
“In fact, most of the cross-border investment outside of Seoul, around 75 percent in 2015-2021, went to industrial real estate,” said Benjamin Chow, head of analytics, Asia-Pacific, RCA.
“In view of the favorable supply and demand dynamics for logistics real estate in South Korea, we expect that the interest of foreign investors will continue this year. Overall, whether they can successfully outbid domestic investors is a different question. “
Despite the downtrend, Seoul was the second most active metropolis in the Asia-Pacific region after Tokyo in terms of commercial real estate transactions.
“Cross-border investors continue to focus their office and retail property purchases primarily in Seoul,” said Chow, adding that Blackstone’s purchase of Starfield Hanam last year was a notable exception.
Meanwhile, Korea was the third largest commercial real estate investment destination in Asia Pacific countries, according to RCA. Transactions in the first quarter were down 13 percent year-on-year, while the 12-month follow-up period to March was 6 percent higher than last year at $ 25.6 billion.
Korea has been valued to be the 10th largest source of cross-border commercial real estate investment. It has deployed $ 572 million in the past 12 months, down 44 percent from last year.
By Son Ji-hyoung ([email protected])