CBRE-2018韩国房地产市场展望（英文版）-2018-22页-4mb

2018 Asia-Pacific Real Estate Market Outlook: Korea Summary

Core Content

The 2018 Asia-Pacific Real Estate Market Outlook for Korea highlights the moderate economic growth expected, the evolution of the real estate sector, and the outlook for key segments such as office and logistics. The report also discusses investment trends, challenges, and opportunities in the Korean market.

Economic Outlook

• Moderate Growth: The Bank of Korea (BoK) forecasts a full-year GDP growth of 3.0% for 2018, following a 3.1% growth in 2017.
• Positive Factors: Improved domestic performance in 2017, combined with a gradual global economic recovery, supports the growth outlook.
• Challenges: Concerns such as unemployment, household debt, overreliance on semiconductors, geopolitical tensions, U.S. protectionism, and China's economic risks remain.
• Interest Rates: The BoK is expected to raise interest rates 1-2 times in 2018, which could dampen commercial real estate investment demand.

Office Sector Outlook

• Stable Demand: Despite significant new supply, overall rents remain stable and net absorption is expected to increase.
• 2018 Forecast: Net absorption is projected to reach 230,000 sq. m., a 1.7x increase from 2017.
• Key Drivers:
  • Technology sector: Expected to drive leasing demand, especially with the Fourth Industrial Revolution.
  • Co-working expansion: Continued growth in co-working spaces, with both international and local providers expanding.
  • Anchor Tenants: Landlords are advised to secure anchor tenants early with early-bird discounts.
• Vacancy Trends:
  • Average vacancy rate for Grade A office space is expected to increase by 1.2%.
  • YBD will see higher vacancy due to tenant relocation and new supply.
• Rental Trends:
  • Overall flat growth in rents, with GBD maintaining stability.
  • YBD may experience a marginal rent decrease due to increased vacancy and tenant exodus.
• Wellness and Amenities: Landlords must focus on wellness and amenities to differentiate in a competitive market, especially as millennials become a larger portion of the leasing demand.

Logistics Sector Outlook

• Growing Demand: The logistics sector is expected to see increased investment activity, driven by e-commerce growth and technological advancements.
• New Supply: 1,750,000 sq. m. of Grade A logistics space is scheduled for completion in 2018, a 3x increase from 2017.
• Geographic Concentration:
  • Yongin and Icheon are expected to see 4 new Grade A assets, totaling ~590,000 sq. m..
  • Western Gyeonggi is emerging as a new logistics hub, with ~1.16 million sq. m. of new supply in the pipeline.
• Facility Trends:
  • Logistics facilities are becoming larger and more modern, with docking systems and advanced technology.
  • The average size of new logistics developments is expected to be over 240,000 sq. m., up from 52,000 sq. m. in 2017.
• Rental Trends:
  • Prime logistics rents may experience marginal compression due to new supply and investment interest.
  • Gross yield for prime logistics assets is expected to fall to 6.5% by the end of 2018.
• Transaction Trends:
  • Transaction volume is expected to increase in 2018, driven by demand for existing assets and new supply.
  • Foreign investment remains strong, with 32% of total Seoul commercial real estate transactions in 2017 coming from overseas.

Capital Markets Outlook

• Transaction Volume: Expected to rise by ~20% in 2018, driven by a sizable number of office transactions.
• Investor Strategies:
  • Local investors focus on core assets with stable tenancies.
  • Foreign investors prefer value-added opportunities, including assets with vacancy risk.
• Cap Rates and Values:
  • Capital values and cap rates are expected to diverge, with core assets seeing higher unit prices.
  • Yield compression is anticipated for core office assets due to limited supply and strong demand.
• Market Transparency: The logistics investment market is becoming more transparent, with more foreign and domestic investors entering the space.

Key Risks and Opportunities

• Opportunities:
  • Strong foreign investment in Seoul's commercial real estate.
  • E-commerce growth driving demand for logistics facilities.
  • Co-working expansion and technology sector growth.
• Risks:
  • Geopolitical tensions with North Korea.
  • U.S. protectionism and China's economic slowdown.
  • Interest rate hikes potentially reducing investment returns.
  • Over-supply concerns in certain sectors.

Summary of Key Figures

• 2017 GDP Growth: 3.1% (first time over 3% since 2014).
• 2018 GDP Forecast: 3.0%.
• 2017 Office Supply: 190,000 sq. m., leading to 10.7% vacancy.
• 2018 Office Supply: 322,000 sq. m., a 40% increase.
• 2017 Logistics Supply: ~1.75 million sq. m., expected to increase 3x in 2018.
• 2017 Total Commercial Real Estate Transactions: KRW 15.7 billion, with 32% foreign capital.
• 2017 Office Transactions: 99 assets, 27 more than 2016.
• 2018 Logistics Gross Yield: Expected to fall to 6.5%.

Conclusion

The Korean real estate market is expected to experience moderate economic growth in 2018, supported by stable domestic demand and global recovery. While office and logistics sectors show strong investment potential, supply-side pressures and interest rate hikes pose challenges. Wellness and modernization will be key for office landlords, and larger, more technologically advanced logistics facilities will dominate the market. Foreign investment remains a significant driver, especially in logistics, with increased transparency and value-added strategies shaping the investment landscape.