Scale Tower Sets New Highest Price Record in Gangnam Area
Signs of Recovery in Seoul... Significant Gap Compared to Other Regions
In the second quarter of this year, DWS Asset Management completed the sale of the Concordian Building in Jongno-gu, Seoul, to Maston Asset Management for approximately 629.2 billion KRW. In the Gangnam area, Hyundai Motor Company purchased half of the revenue interest in Scale Tower from SK D&D for 253.2 billion KRW. This transaction set a new record for the highest price in the Gangnam area, with a price per pyeong exceeding 50 million KRW.
Transactions involving large office buildings and commercial/business real estate in Seoul (excluding collective buildings such as shopping centers) have increased in scale again after hitting a low in the first quarter of this year. Although the investment market was subdued last year due to the COVID-19 pandemic followed by a rapid rise in interest rates, some deals were completed in the second quarter, signaling a recovery.
◆Office Transactions in Seoul and Bundang Reach 3.3 Trillion KRW in Q2... A 230% Surge Compared to Q1
According to Cushman & Wakefield on the 19th, a total of 12 office building transactions in the Seoul and Bundang areas amounted to 3.2726 trillion KRW in the second quarter. This represents about a 13% decrease compared to the same period last year but a remarkable 230% increase compared to the previous quarter. In the first quarter, only 4 transactions totaling 990.5 billion KRW were recorded.
One of the representative transactions in the second quarter was the Concordian Building, which had been on the market since last year and recently completed ownership transfer. Scale Tower near Gangnam Station was purchased by Hyundai Motor Company to secure office space, with plans to relocate the organization currently housed in Autoway Tower to Scale Tower. The Donghwa Building in Seosomun, which had failed to sell once due to a downturn in the real estate market, found a new owner at 263.2 billion KRW as JB Financial Group stepped in to develop a new headquarters.
Additionally, Samsung SRA Asset Management purchased the Pangyo Alpha Dome Tower from Mirae Asset Management for 728.4 billion KRW, with Samsung Life Insurance and Samsung Fire & Marine Insurance participating in the investment. Hyundai Card acquired Building 1 of the Hyundai Card Building in Yeouido from NH-Amundi Asset Management for 245 billion KRW, and ownership of Asterium Yongsan was transferred from M Plus Asset Management to Shinhan REITs Management.
Jinwoo Jeong, team leader at Cushman & Wakefield, explained, "Investment activities, which had frozen due to deteriorating domestic and international financial conditions since the end of last year, have resumed, indicating market recovery. Factors such as low remote work transition rates, steady demand, and insufficient supply have influenced this." He added, "Many properties are expected to close transactions in the second half, suggesting the market will emerge from the downturn caused by interest rate hikes."
◆Increase in Small and Medium-Sized Building Transactions in Seoul... Nationwide Spread Remains Uncertain
Signs of investment recovery appeared not only in large office buildings dominated by corporations but also across the market, including small and medium-sized buildings.
According to an analysis by ValueMap based on actual transaction data from the Ministry of Land, Infrastructure and Transport, the number of commercial and business real estate transactions in Seoul in the second quarter (based on reported transactions) was 327, a 9.4% increase from 299 in the first quarter. Although this is about half compared to the same period last year, it is considered to have escaped the historically low transaction cliff from December last year to February this year. The total transaction amount also rose from the 2 trillion KRW range in the first quarter to the 3 trillion KRW range.
Among transaction amounts, deals ranging from 1 billion to 5 billion KRW, corresponding to small and medium-sized properties, were the most frequent, with transactions in the 5 billion to 10 billion KRW range also notable. Kyungjin Jeong, a researcher at ValueMap, explained, "Both corporations and individuals are participating in small and medium-sized building transactions, and real estate prices have surged in Seoul over recent years, raising the price standards themselves."
However, there are also forecasts that the recovery in investment will not easily spread nationwide due to significant disparities between Seoul and other regions. Researcher Jeong said, "Even in Gyeonggi and Incheon, prices are falling due to a sharp decline in transactions. In Seoul, strong price floor rigidity is at work, so how long the market can endure will determine its revitalization."
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