In Q1/2016, 14 small- to mid-sized office buildings were transacted. The total investment volume was over KRW1 trillion. As some deals have taken longer to close, most of the transactions were from assets which were marketed last year.

Samsung continued restructuring their real estate portfolio, liquidating not only non-core assets but also prime buildings such as the Samsung Life Headquarters in the core CBD. Further disposals are expected from them over the course of this year. West Gate Tower in the CBD fringe sold to Hyundai Investments for KRW149.7 billion (KRW16.4 million per 3.3058 sq m). Invesco purchased the Samsung Life Insurance building in Hongdae, which is a growing retail area with increasing Chinese tourist numbers, plus a thriving university student community. We understand they plan to redevelop and increase the retail portion of the scheme.

Alpha Investment Partners purchased 82% of Jongno Tower, which was owned by Samsung Life Insurance, and have signed an SPA for the remaining 18% share with its owner Youngbo. Alpha are expected to close the deal for the outstanding 18% for KRW103 billion in Q2/2016. M&G is also expected to complete the sale of the Nara building for KRW208.4 billion in April to Koramco, one of the major fund management companies in Korea.

On April 19, the Bank of Korea (BOK) decided to freeze the Base Rate at 1.5%. It has held this lowest-ever level for 10 consecutive months. The five-year Treasury bond rate decreased to 1.6% from 1.8% at the beginning of this year. BOK announced their intention to sustain low base rates to offset diverse risks, including emerging market instability, further possible increases in the U.S. base rate, and global financial market volatility.

The retail and logistic investment markets continue to grow. M-Plaza (previously owned by Invesco), a landmark mixed-use asset comprising retail and a hotel situated in Myeong-dong, Korea’s most popular retail destination, was sold to a privately-owned property company at a unit price of KRW55 million per 3.3058 sq m. The cap rate is estimated to be in the mid-4% range. ZARA and Forever21 are the anchor retail tenants and have leases until 2023, whilst 7/F and above are leased to the Solaria Nishitetsu Hotel, owned by West Japan Rail Way Company, until 2027.

Many investors have been attracted to the relatively higher yielding logistics sector. Halla Logistics’ cold storage (owned by RREEF, now DeAWM), located near Pyeongtaek, sold to Mirae Asset for KRW89.2 billion with a cap rate in the mid-7% range. The current tenant, Halla Holdings, have seven years remaining on their master lease.

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