CBRE Korea, announced that commercial real estate transaction volume stood 12.9 trillion won in 2018, an increase of 84% y-o-y, according to CBRE Korea’s Q4 MarketView report. The figure was the highest annual total ever recorded, eclipsing the previous record set in 2016 by 20%.

The CBRE Korea releases Seoul MarketView Q4 2018 report at a glance

• Commercial real estate transaction volume reached 12.9 trillion won – an increase of 84% y-o-y in 2018
• Transaction volume reached 3.3 trillion won in fourth quarter
• Investment in office and industrial markets driven by robust demand

Don Lim, Managing Director of CBRE Korea, remarked, “Transaction volume reached 3.3 trillion won in the fourth quarter alone, and this year’s record-high transaction volume was driven by robust demand for large assets from domestic and foreign investors, supported by abundant liquidity.”

Claire Choi, Head of Research at CBRE Korea, said, “The average vacancy rate in Seoul’s three major business districts fell 1.2%pt q-o-q due to active demand for lease. In the retail sector, duty free sales grew, while in the industrial sector, strong demand for cold-chain logistics expanded beyond traditional hubs in Yongin and Icheon to the northeastern parts of Greater Seoul such as Guri and Namyangju.”

Choi told WILLIAMS MEDIA, “Investment demand for logistics properties was strong in the fourth quarter. Noteworthy deals included purchase of Hwaseong-Dongtan Logistics Complex for around 640 billion won. Several other domestic asset management companies also completed acquisitions of logistics assets located in Anseong and Icheon area”

Office

There was no new supply of Grade A offices in the major business districts in the fourth quarter. The average vacancy rate was 11.1%, a decline of 1.2%pt q-o-q, due to strong lease demand. Leasing activity in the Central Business District (CBD) was dominated by relocations of domestic companies such as SKT and SK. In Yeouido Business District (YBD), prime buildings including Two and Three IFC registered solid leasing activity. Net absorption in Gangnam Business District (GBD), which remained steady on leasing in 2018, stood at 24,299 sq.m. Seoul average Grade A effective rents rose by 0.3% q-o-q, which increased 2.6% y-o-y due to the supply of new assets asking for relatively higher face rents than the average.

Retail

The retail sales market slightly increased with growth of 1.1% q-o-q, 5.5% y-o-y in Q3 2018. Duty free sales remained the main growth engine, rising by 27.2% y-o-y. Lotte, Shilla, and Shinsegae led the duty free market, and Hyundai Department Store opened a duty free store at its World Trade Center branch. Additionally, the southern part of Greater Seoul saw new supply such as AK& Giheung, Lotte Premium Outlet Giheung and Starfield City Wirye.

Industrial

The fourth quarter witnessed strong demand for logistics space in local companies due to demand for overnight delivery and competition to improve delivery speeds. Growing consumer spending power on fresh-food contributed to expansion of cold-chain logistics centers in Guri and Namyangju, Overnight fresh-food delivery companies have been expanding in these areas, although Namyangju’s status as an environmentally protected area is limiting the development of new supply. Meanwhile, average yields for prime logistics assets remained stable at 6.5%. The purchase of Hwaseong-Dongtan Logistics Complex for 641.45 billion won marked the largest logistics deal in two years.

Investment

Commercial real estate transaction volume stood at 12.9 trillion won in 2018, which is the highest annual total ever recorded. In the fourth quarter, transaction volume reached 3.3 trillion won, with 66% for office deals and 25% for logistics space. The sale of the Centropolis was completed for 1.12 trillion won, marking the largest single commercial real estate deal in Korean history. Average effective yields for Seoul Grade A offices were relatively stable, standing at 4.7%.

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