Korea's evolving investment market amid high demand and rising interest rates
Insights & recommendations
In 2021, the Korean commercial real estate investment market achieved the highest investment volume in all sectors including offices, logistics, retail and hotels due to low interest rates and abundant liquidity.
Most Korean real estate investment is led by domestic investors. Moreover, since 2021 investment in trillion won trophy assets has shifted from global investors to domestic investors.
Unlike in the past, when asset managers primarily invested in real estate through real estate funds, competition is intensifying as not only REITs, but also investment platforms offering digital asset backed securities (DABS) and tech companies have arisen as major buyers of real estate.
- Despite rising interest rates, sales prices continue to rise, therefore, we recommend investors diversify their investments, such as from offices to data centers, to reposition capital seeking the highest returns available in the current market.
- In the next two years, we expect the size of investments to decrease due to rising interest rates and a lack of investable assets.
- We expect Korean asset managers to increase their investments in logistics centers in 2022 as the number of offices available for investment decreases.