2018韩国房地产市场展望（英文版）_22页-4mb

2018 Asia-Pacific Real Estate Market Outlook: Korea Summary

Core Content Overview

The 2018 Asia-Pacific real estate market outlook for Korea highlights moderate economic growth, increased investment activity, and evolving market dynamics across key sectors such as office, logistics, and capital markets. Despite challenges like low GDP growth, rising interest rates, and geopolitical uncertainties, the market is expected to remain stable and attractive to both domestic and international investors.

Main Economic Outlook

• GDP Growth: Korea's GDP growth in 2017 reached 3.1%, the highest since 2014. The Bank of Korea (BoK) forecasts 3.0% for 2018, driven by improved corporate performance, investment, and the PyeongChang 2018 Winter Olympics.
• Challenges: Q4 2017 recorded a -0.2% GDP growth, raising concerns about unemployment, household debt, overreliance on semiconductors, geopolitical tensions with North Korea, U.S. protectionism, and potential economic slowdown in China.
• Interest Rates: The BoK is expected to raise interest rates 1–2 times in 2018, potentially impacting real estate investment demand.

Office Sector Outlook

Key Trends

• New Supply: Four new Grade A office buildings totaling 322,000 sq. m. are expected to be completed in 2018, a 40% increase from 2017.
• Leasing Demand: Net absorption is forecast to rise to 230,000 sq. m., up 1.7 times from 2017. This is driven by:
  • Expansion of the technology and FinTech sectors
  • Growth of the co-working sector
  • Increased pre-leasing activity
• Vacancy Rate: Average Grade A office vacancy is expected to rise by 1.2%, mainly due to new supply and tenant relocations.
• Rental Growth: Overall rent growth is expected to remain flat, with YBD seeing a marginal decrease due to increased vacancy and tenant exodus.

Differentiation Strategy

• Wellness and Amenities: Landlords are encouraged to focus on wellness features and community amenities to attract millennial tenants, who are expected to be the largest segment in the office leasing market.
• Anchor Tenants: Securing anchor tenants early is advised to stabilize occupancy and reduce incentives.

Logistics Sector Outlook

Key Trends

• Demand Growth: E-commerce sales grew by 20% in 2017, and are expected to grow by 21% in 2018, driving demand for modern logistics facilities.
• New Supply: Approximately 1.75 million sq. m. of new Grade A logistics space is expected to be completed in 2018, three times the 2017 figure. Supply is concentrated in Gyeonggi province, especially in the southeast and west.
• Facility Size: Average logistics development size in 2018 is expected to be over 240,000 sq. m., four times larger than 2017. This reflects a shift from small storage-based centers to larger, more complex facilities.
• Rental Trends: Prime logistics rents are expected to see marginal compression due to increased supply and investment activity, while existing assets may see a slight decrease.

Market Transparency

• The logistics market is becoming more transparent as more investors, both local and foreign, enter the sector. However, limited market information remains a challenge.

Capital Markets Outlook

Investment Activity

• Transaction Volume: In 2017, Seoul's commercial real estate investment volume reached KRW 7 trillion, a 34.6% decline from the previous year due to delays and base effects.
• Foreign Investment: Foreign investors accounted for 32.3% of total investment turnover in 2017, often focusing on value-added strategies and assets with vacancy potential.
• 2018 Outlook: CBRE Research forecasts a 20% increase in transaction volume in 2018, driven by a large number of office transactions in the pipeline.

Price and Yield Dynamics

• Core Assets: Capital values and cap rates are expected to diverge, with core assets seeing higher unit prices due to strong demand and limited supply.
• Yield Compression: Marginal yield compression is anticipated on core office assets due to limited availability and high demand.
• Gross Yield: Prime logistics gross yield is expected to fall from 6.6% in 2017 to 6.5% by the end of 2018.

Key Opportunities and Risks

Opportunities

• Office Sector: Continued demand from technology, finance, and co-working sectors, along with pre-leasing strategies.
• Logistics Sector: Strong e-commerce growth, increased supply, and modernization of facilities.
• Investor Interest: Solid demand from overseas investors due to higher yields and stable leasing markets in Korea.

Risks

• Economic Uncertainty: Concerns over global trade tensions, geopolitical issues, and interest rate hikes.
• Vacancy Risk: Increased supply could lead to higher vacancy rates, especially in YBD.
• Yield Compression: Expected in both office and logistics sectors due to supply and demand dynamics.

Conclusion

Korea's real estate market is expected to maintain moderate growth in 2018, supported by economic recovery, e-commerce expansion, and increased foreign investment. However, supply pressures, interest rate hikes, and geopolitical uncertainties pose challenges. Landlords and investors must adapt by differentiating assets, focusing on wellness and modernization, and strategically managing risk to capitalize on opportunities.