"Transaction volume is expected to reach 11 trillion won this year, highest since 2016"

CBRE Korea, announced that commercial real estate transaction volume in Seoul reached 2.8 trillion won in the third quarter, an increase of 65% y-o-y, according to CBRE Korea’s Q3 MarketView report. The Gangnam Business District (GBD) continues to attract the strongest office demand and the purchase of the Samsung C&T Building valued the property at 30 million won per pyeong, the highest unit price in Korean history.

Claire Choi, Head of Research at CBRE Korea, told WILLIAMS MEDIA “The GBD continues to attract the strongest office demand of all districts. Leasing deals included a U.S. based coworking space provider committing to six floors in Textile Center. In the retail sector, Serosugil, another  high street behind Garosugil,  is developing a reputation as a trendsetting retail area following several major new openings including Maison Kitsune's flagship store and 10 Corso Como Magazzini.”

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"The investment market saw brisk activity in the third quarter with 43 assets changing hands, and offices accounted for 83% of total transaction volume. If several anticipated deals are completed this year, transaction volume will be the highest since 2016, when 11 trillion won worth of deals were recorded, the highest in history.” In the retail sector, several foreign cosmetics and F&B brands debuted in Seoul in the quarter. The retail market has received a considerable boost from improved relations with China and North Korea. Boutique fashion and cosmetics brands have also begun to re-enter the trendy Garosugil area over the past few quarters. In the industrial sector, the Chuseok holiday generated considerable short-term leasing demand for relatively medium and large-sized spaces that can bridge the rapid increase in logistics volume.

Office

Average effective rents for Seoul Grade A office buildings increased by 1.0% q-o-q to 21,258 won per sq.m in the third quarter, largely due to new buildings completed this quarter charging a higher-than-average face rent. Incentives remained relatively flat. New stock in the form of Centropolis and Gangnam N Tower pushed up average Seoul Grade A office vacancy to 12.3%, a 1.5%-pt increase from the previous quarter, despite leasing demand remaining generally strong.

Retail

Foreign direct investment reached US$10 billion and spending by overseas tourists in specialist stores helped retail sales volume grow by 16% y-o-y in Q2 2018. In addition, several new foreign cosmetic and F&B brands debuted in Seoul in the quarter. Over the past few quarters, boutique fashion and cosmetic brands have begun to re-enter Garusogil. Meanwhile, many new stores are incorporating artificial intelligence, such as UNIQULO’s second brand GU in Lotte World Mall and Armani’s beauty store located in Shinsegae.

Industrial

The third quarter witnessed continuous demand from third-party logistics and e-commerce companies. This demand remained focused on the southeastern part of Gyeonggi province, notably Icheon and Yongin. The Chuseok holiday period generated considerable short-term leasing demand for relatively medium- and large-sized spaces that can bridge the rapid increase in logistics volume. Newly supplied large-scale assets including FILA Logistics Center and Samsung Logis Logistics Center are expected to satisfy future demand for modern logistics space in the southeastern Gyeonggi area. Average yields for prime assets remained stable at 6.5%.

Investment

The investment market saw brisk activity in the third quarter, with 43 assets changing hands for a total of 2.8 trillion won, an increase of 65% y-o-y. Several major transactions were completed in the GBD, which continues to enjoy solid leasing demand. Deals included the Samsung C&T building, which was purchased by a local financial consortium led by NH Investment & Securities and KORAMCO for about 748 billion won. The deal valued the space at a record 30 million won per pyeong. Transaction volume is expected to exceed 10 trillion won this year amid robust market sentiment and plenty of liquidity. Several deals including Centropolis and HP Building are likely to be concluded in Q4 2018. If deals for Booyoung Eulji Building and Seoul Square are also completed, transaction volume will be the highest since 2016, when a record 11 trillion won worth of deals were recorded.

For more information or to gain access to the report email Claire Choi, Head of Research at CBRE Korea via the contact details below.

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