Average Actual Transaction Price of Commercial Properties in Q1 This Year Hits Record High

Average Nationwide Commercial Property Sale Price 6.06 Million KRW per ㎡
Highest Level on Record for Q1 Since 2006

[Asia Economy Reporter Hwang Seoyul] As social distancing measures are eased and commercial districts show signs of recovery, the transaction prices of commercial properties in the first quarter of this year have also reached an all-time high.

On the 29th, Real Estate R114 analyzed transaction data by type of commercial property from ‘RCS,’ a commercial real estate analysis solution. The average nationwide transaction price per square meter (exclusive area) for commercial properties in the first quarter of this year was recorded at 6.06 million KRW. This is the highest level ever recorded for the first quarter since the Ministry of Land, Infrastructure and Transport began compiling actual transaction prices for commercial properties in 2006. In particular, despite the commercial districts shrinking due to the impact of COVID-19 last year, demand flowed into the commercial property market, which is relatively less regulated compared to housing, causing transaction prices to rise sharply.

Looking at the average transaction price per square meter in the first quarter by type, the figures were ▲complex shopping malls 9.14 million KRW ▲residential-commercial mixed-use commercial properties 8.38 million KRW ▲knowledge industry center commercial properties 6.86 million KRW ▲office commercial properties 6.65 million KRW ▲in-complex commercial properties 6.43 million KRW ▲neighborhood/plaza commercial properties 5.41 million KRW. Compared to commercial properties supported by residential demand, large malls and office district commercial properties with abundant foot traffic had higher transaction prices, which is analyzed to reflect the high land prices in commercial areas. Since RCS reconstructs the Ministry of Land, Infrastructure and Transport’s actual transaction data into seven types of commercial properties, transactions of commercial properties not belonging to these types are excluded.

By region, both the metropolitan area and provinces showed an upward trend, with the transaction prices of commercial properties in the metropolitan area rising relatively more, widening the gap. In the first quarter of 2020, when COVID-19 first broke out, the average transaction price in the metropolitan area was 5.88 million KRW, down from 6.14 million KRW the previous year, but it rose sharply to 7.05 million KRW the following year in 2021. On the other hand, the average transaction price of commercial properties in the provinces steadily increased, suggesting that the impact of social distancing was relatively less severe, but due to fewer foot traffic and rare transactions, the increase was minimal.

Real Estate R114 forecasted that investor interest in the commercial property market will continue due to reduced vacancy risks following commercial district recovery and easier loan access compared to housing. In particular, it is expected that the number of investors seeking capital gains will increase, especially centered in the metropolitan area.

Yeokyunghee, Senior Researcher of the Research Team at Real Estate R114, stated, “When investing in commercial properties, it is important to keep in mind that investment returns vary depending on location, type, and business category,” adding, “Sufficient preliminary research such as site visits should be conducted.” She further added, “To minimize the risk of interest rate hikes, excessive borrowing should be avoided.”