Korea office transaction volumes hit USD2.2b in Q3

One of the major transactions is a USD532m deal for Shinhan Investment Building.

According to a Colliers report, core office assets continued to drive investment activity in Korea in Q3 despite rising interest rates prompting investors to become conservative in their outlook.

Total office transaction volumes for Q3 stood at KRW3.1 trillion (USD2.2 billion). 

Here’s more from Colliers:

Deals that closed include Shinhan Investment Building, Seoul City Tower, KT&G Kosmo Tower and West Gate Tower. 

Hines made its first office investment in Korea, purchasing Westgate Tower for KRW228 billion (USD162.4 million). 

Several other deals, including assets such as Seosomun Donghwa Building, Jongro Tower and Concordion building, are either signed or in exclusivity and expected to be closed by year-end.

Forecast 

We expect the overall size of investments in prime office assets in Seoul to decrease for the following two reasons: lack of supply due to the passive investment environment and rising interest rates. 

Nonetheless numerous overseas investors are actively monitoring the Korean office market and seeking ways to raise capital through equity rather than loans. We expect them to be active again once they have secured the required funds. 

Expert view 

The recent interest rate hike has delayed deals by disrupting financing plans. Recent investment trends show investors leaning towards increasing equity, lowering LTVs, and increasing the buy cap rate.