Due to Consecutive Interest Rate Hikes... Q3 Large Office Transactions Down 31% Year-on-Year

[Asia Economy Reporter Ryu Taemin] Large office transactions in the third quarter of this year plummeted by more than 30% compared to last year. This is interpreted as being affected by the difficulty in utilizing real estate mortgage loans due to consecutive interest rate hikes.

According to Cushman & Wakefield, a real estate service company, the scale of large office transactions in Seoul and the metropolitan area in the third quarter was recorded at 2.3 trillion KRW. This represents a 31% decrease compared to the same period last year. However, thanks to active transactions until the first half of the year, the cumulative transaction amount since the beginning of this year was 9.2 trillion KRW, higher than last year.

In the third quarter, a total of six transactions were made in areas other than the Gangnam district. The largest transaction was Shinhan Investment Corp.'s sale of its Yeouido headquarters building to Aegis Asset Management for 639.5 billion KRW. The price was 30.24 million KRW per 3.3㎡, which is more than 5 million KRW higher per 3.3㎡ than the highest building price recorded in Yeouido last year by O2 Building.

In the city center, Jongno Place was traded for 333.3 billion KRW, changing ownership from Capital Land to Samsung Fire & Marine Insurance. Seoul City Tower, owned by Koramco Asset Trust, was sold to Aegis Asset Management for about 490 billion KRW. Although the initially selected preferred negotiator withdrew from the purchase, Aegis Asset Management, together with a foreign asset management company, offered a price of about 27 million KRW per 3.3㎡ and completed the transaction.

In other areas, KB Asset Management sold the Ire Building in Seonyu-dong, Seoul, to Kyobo Asset Trust for 307.5 billion KRW. Despite the difficult market conditions, the Ire Building was considered tradable due to its low vacancy rate and relatively excellent location. The Correctional Service Mutual Aid Association completed the purchase of Cosmo Tower in Wangsimni, Seoul, from Kiwoom Asset Management for 112 billion KRW. It is known that the purchase was made entirely in cash.

The market is expected to maintain a calm atmosphere until the end of the year. The sale of Yeouido IFC, which was expected to be the largest transaction of the year, was finally canceled. Mirae Asset Management applied for a REIT business license to acquire IFC immediately after being selected as the preferred negotiator but failed to obtain approval within the period. The U.S. Federal Reserve raised the benchmark interest rate sharply last month, causing the fourth-ever inversion of the Korea-U.S. benchmark interest rates in history. Due to consecutive interest rate hikes, the market is seeing an increase in withdrawal of sales.