APAC guide: South Korea’s real estate bounces back post-pandemic

The country’s largest funds continue to increase their allocation to alternative assets.

South Korea’s real estate market has recovered well after the pandemic. However, its cohort of institutional investors will be slower to get back into international markets.

Korea is still an important source of capital for global real estate investment managers, says Louise Kavanagh, CIO and head of Asia-Pacific real estate at manager Nuveen. “However, it will be less robust than in the past due to the poor real estate performance of their overseas portfolio over the past year and the decline in the Korean won versus other currencies.”

Steve Kim, head of LaSalle Investment Management Korea, adds: “Due to macro-economic uncertainties currently, our Korean clients continue to be selective towards overseas real estate, for this year.”

However, Kavanagh says Korean capital remains “eager” to invest outside of the home market in search of higher returns. “NPS, for example, intends to steadily increase its allocation in alternative asset classes, including real estate and overseas opportunities, from 13.8 percent to 15 percent between 2024 and 2028.”


Seoul CBD office vacancy rates remain very low


Total amount targeted
by funds in market

Many Korean investors are increasing their focus on real estate debt in order to maintain returns with downside protection. For example, the Korean Teachers’ Credit Union intends that half its overseas real estate investment in the next 12 months will be debt, while the Government Employees Pension Service plans to invest $35 million across two debt funds.

The Seoul office market has been a standout in the region, untouched by the homeworking trend and buoyed by tight supply, with CBD vacancy rates of only 1.7 percent, according to data from real estate services firm Savills.

Kim says: “Face-to-face engagements are predominant in Korea’s business culture and Seoul did not shut down during the pandemic. Therefore the trend toward remote working has been limited in Korea, relative to the US or Europe. This dynamic may continue for the Grade-A office sector in Seoul assuming the economy is positioned for a soft landing.”

April 2023

Private equity group KKR bought Namsan Green Building, a 620,000-square-foot Seoul office building, for a reported 250 billion won ($192 million; €177 million) from domestic asset manager IGIS

June 2023

Hong Kong-based ESR Group planned to raise $300 million-$500 million for a forthcoming Korean fund to capitalize on opportunities created by rising interest rates

June 2023

Sovereign wealth fund Korea Investment Corporation reported that its allocation to real assets rose to $16.5 billion, or 9.75 percent of its portfolio in 2022, up from $13.4 billion, or 6.53 percent of the portfolio the previous year