The Research & Strategy Division of Koramco Asset Management published the "2025 Q3 Commercial Real Estate Market Outlook Report" on September 5.
Koramco releases its commercial real estate market outlook report to the public every quarter to improve information asymmetry in the real estate market and support investors in advancing their investment strategies.
The report forecasts a gradual recovery in the commercial real estate market for the third quarter. It expects that the increasing likelihood of a U.S. interest rate cut and the easing of sluggish private consumption in the second half of the year will help the commercial real estate market recover. However, it also predicts a clear polarization in recovery intensity depending on the fundamentals of each asset type and changing real estate trends.
In the first half of this year, the office transaction volume reached approximately 11.7 trillion won, up 186% from the same period last year. The market was invigorated by a series of large office transactions for corporate headquarters, such as Hyundai Motor Company's acquisition of Scale Tower near Gangnam Station and CJ Olive Young's purchase of the KDB Life Tower near Seoul Station, each exceeding 10,000 square meters.
The "flight to quality" trend, which refers to the preference for high-quality offices, is spreading, leading to a higher proportion of large, prime office transactions. Foreign investors also showed strong interest in major offices located in key business districts such as Gangnam, Yeouido, and Jongno. The report analyzed that, with new office supply expected to increase in Seoul's central business district, it will be important to monitor the stability of the leasing market in the second half of the year.
The logistics center market is experiencing a pronounced vacancy burden. The transaction volume in the Seoul metropolitan area was 1.6 trillion won, a 45% decrease compared to the same period last year. While the declining trend in new logistics center supply is positive, vacancy rates remain high at 16% for ambient centers and over 40% for cold storage centers, reflecting the challenging leasing market. Global investors are selectively investing in newly built mixed-use and ambient facilities completed within the past three years, which allows for limited inflow of foreign capital.
The hotel market is being driven by a surge in foreign tourists, surpassing pre-pandemic levels. The diversification of demand by nationality, including increases in tourists from Taiwan and the United States, is strengthening the long-term growth foundation of the hotel market. There is also a growing number of transactions involving Seoul hotels for operational purposes by foreign capital. The report anticipates that the hotel market will remain active for the time being, especially with luxury hotel brands such as Rosewood and Aman planning to enter Korea.
Data centers are evaluated as core assets in the New Economy sector. With the industry entering a full-fledged growth phase, investment interest is also rising. The report projects that, after 2025, the supply of data center facilities for leasing will rapidly increase, particularly led by financial investors and global operators.
According to the report, six data centers are scheduled to be supplied in the Seoul metropolitan area this year alone, and by 2027, a total of 22 new data centers will be supplied in the metropolitan area (including Yongin, Ansan, Goyang, and the southwestern part of Seoul) and Busan.
Due to challenges in securing power and a shortage of developable land, data centers in key areas of the metropolitan region are expected to become increasingly scarce. Recent real transactions involving the Hanam data center and Sejong Telecom's Bundang IDC indicate the potential for market revitalization. As collaboration projects with global cloud service providers become more active, the report expects long-term and stable profit generation as a real estate investment destination.
For rental housing, the report diagnosed that policies such as the June 27 measures and the implementation of the third stage of the Stress DSR are weakening the jeonse (lump-sum deposit lease) market and restricting the sales market, creating favorable conditions for the formation of the monthly rent market. It also explained that there are numerous ongoing investment transactions involving the conversion of small residential facilities with around 100 units into co-living or senior housing, or the development of new rental dormitories.
Kim Yeolmae, Head of Research & Strategy at Koramco Asset Management, stated, "In the third quarter, the commercial real estate market will see a sharp divergence in performance by asset type. Prime offices and hotels will maintain solid demand. In contrast, logistics centers face significant vacancy pressures, while data centers and rental housing are emerging as investment alternatives that combine long-term growth potential and stability. The polarization among investment assets is expected to become even more pronounced."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
