The Seoul office sector is set for another busy year, with growing interest from foreign and domestic investors.
Transactions volumes hit a record last year, Savills data show. 2018 was also a vintage year for large lot sizes, with 12 transactions valued in excess of KRW300bn ($265m), twice the number in 2017. The average office yield compressed to 4.7%.
Domestic investors have been particularly active, with securities companies, real estate investment trusts and blind funds from Korean investors chasing deals.
Foreign investors are also showing more interest in Seoul, with KKR, M&G Real Estate and Angelo Gordon amongst the overseas groups which bought in Seoul last year. ANREV’s investment intentions survey for 2019 showed Seoul was the sixth most popular city amongst investors, up from 10 th place last year.
JoAnn Hong, director, research and consultancy, valuation at Savills Korea, says: “We do not expect further interest rate rises this year and there is still a lot of liquidity in the market with overseas investors – some new to the market – Korean funds and REITs all chasing properties.
“We do not expect to see the mega-deals we saw last year, such as Centropolis, which sold for nearly $1bn, but there are still large deals in the pipeline.” The popularity of the Seoul office sector is backed by occupier market performance: 2018 net absorption was 270,000 sq m, 1.8 times the five-year average of 150,000 sq m. Savills data show average prime rents rose 1.7% last year.
Savills Korea Office Research