CBRE Korea Reports KRW 8 Trillion in H1 2024 Commercial Real Estate Transactions, Market Size Expected to Grow in H2

- Market size expected to increase significantly in H2 due to expectations of interest rate cuts and ongoing office market transactions
-Office transactions decreased in Q2 2024, while logistics drove the market with transaction amounts totaling 1.3222 trillion won

July 22, 2024 (Seoul) – CBRE Korea, the world's largest commercial real estate services company, announced in its "Seoul Figures Q2 2024 Report" that the total transaction volume for commercial real estate in the first half of 2024 reached KRW 8 trillion, marking a 3% increase year-over-year. Projections for the second half of the year suggest a significant market expansion, bolstered by expectations of interest rate cuts and ongoing transactions primarily in the office sector.

While the overall investment market size remained stable in H1, the commercial real estate investment market size in Q2 of this year was recorded at KRW 3.7686 trillion, a 12% decrease from the previous quarter. This decline is primarily attributed to the absence of transactions involving Grade A assets in the office sector, despite an increase in the logistics sector driven by preemptive acquisitions of hotels and Grade A assets. Office transactions amounted to approximately KRW 1.2345 trillion, accounting for about 33% of the total market size, whereas logistics transactions reached approximately KRW 1.3222 trillion (35%). This marks the second similar scale shift since Q1 of last year, when the preemptive acquisition of a large logistics asset in Incheon concluded, leading to logistics transaction volumes surpassing those of the office sector. Hotel transactions were recorded at approximately KRW 793.7 billion (21%), and retail transactions at approximately KRW 417.9 billion (11%).

Key office market transactions in Q2 included Capstone Asset Management's acquisition of Icon Yeoksam from UK-based M&G for 204 KRW billion through a blind fund. Namyang Deokjeong Limited Liability Company purchased the YD318 Building from Metheus Asset Management for KRW 105 billion, while matchmaking company DUO acquired the K-Platz Sinnonhyeon Building from KREITs for KRW 82.5 billion. In the CBD, Korea Land Trust acquired Boryeong Holdings' headquarters, Boryeong Building, for KRW 132 billion through a sale-and-leaseback arrangement.

In the retail sector, the number of foreign tourists has continued to recover to 90% of pre-pandemic levels (May 2019). Global sports brands at Gangnam Station have enhanced their ability to attract foreign customers through store renovations, while Garosu-gil has seen an increase in foot traffic, leading to the opening of new fashion and beauty brand stores and a subsequent rise in sales.

The logistics sector, which recorded the highest transaction volume this quarter, was primarily driven by pre-purchase cases of newly supplied large assets. Notably, IGIS Asset Management completed the pre-purchase of Seocknam Innovation Logistics Center from US-based KKR, and US-based LaSalle Investment Management acquired Daedeok Logistics Center Building A in Anseong for approximately KRW 300 billion. Several direct acquisitions by construction companies were also confirmed. DL Construction acquired the SPC Logistics Center for KRW 125.9 billion, and Hwasung Industrial acquired the Byeolnae ONE Logistics Center for about KRW 108.2 billion. In the hotel sector, the transaction of the Grand Hyatt Seoul by JS Corporation and Blue Cove Asset Management was completed in this quarter.

Claire Choi, Senior Director, Head of Research at CBRE Korea, commented, “Large transactions centered around the office market in Q1 have driven the increase in the commercial real estate investment market size in the first half of this year. With robust office demand and increasing inbound investment in the domestic commercial real estate market, a further expansion of the commercial real estate investment market size is expected in the second half of the year."