Foreign Major Investors Buying Up Domestic Commercial Real Estate

"Domestic Institutions Take Conservative Approach Amid High Interest Rates"
Foreign Firms with Strong Capital Eye Investment Opportunities

In the domestic commercial real estate market, the investment share of foreign institutions has recovered to pre-COVID-19 levels. As domestic institutional investors act conservatively amid high interest rates, foreign capital's acquisition of real estate assets is expected to become more active.

Seoul city office building skyline / Photo by Yonhap News

According to the '2023 Korea Commercial Real Estate Market Trends' report recently released by global real estate consulting firm Colliers on the 12th, the total investment amount in the market last year was approximately 49 trillion won, down about 15% from the previous year.

Among this, the share of foreign investment accounted for 12.1%, nearly doubling compared to the previous year (6.7%). This figure is close to that of 2019 (13.0%), before the COVID-19 pandemic. In 2020, it was only 8.6%.

Colliers stated, "Domestic institutions, which have led more than 90% of the market in recent years, have recently shifted to bond investments as interest rates rose, adopting a wait-and-see stance. On the other hand, foreign institutions continued investing in domestic real estate even in the fourth quarter of last year."

For example, Singapore-based Keppel Asset Management purchased the Samhwan Building in Jongno-gu, Seoul, for about 223.2 billion won. It is known that they considered a value-add strategy to increase the value of the existing building through remodeling and other means. Global real estate investment firm BentallGreenOak, headquartered in New York, USA, acquired the GB1 and GB2 buildings in Pangyo Techno Valley, Seongnam-si, Gyeonggi Province, through securities transactions.

Colliers also reported that various foreign private equity funds are scouting for domestic commercial real estate investment opportunities. Loan products targeting domestic developers facing difficulties in financing due to project financing (PF) risks are also expected to become one of the investment destinations for foreign investors.

Colliers explained, "Funds targeting Asia have increased, and compared to China or emerging markets, Korea is evaluated as a stable investment destination. Foreign institutions are looking for investment opportunities domestically based on increased capital strength due to the strong dollar." They added, "Domestic institutions are expected to wait for investment opportunities until the first half of this year as their available investment funds have shrunk due to increased lending."