Better than a 2 billion dollar apartment in Gangnam… Where individual investors flock

In the second quarter of last year, Seoul office building prices recorded the highest rate of increase among major cities in the world. Cars are coming and going on Teheran-ro, Gangnam, Seoul, where the highest-priced office buildings in Korea are concentrated. Reporter Kim Young-woo

In the second quarter of last year, commercial real estate prices in Seoul rose the most in the past decade. It has the highest rate of increase among major cities in the world. Analysts say that the government has increased the investment in shopping malls, small buildings, and officetels instead of apartments, and liquidity is also concentrated in public offering REITs using office buildings as assets. The fact that large tech companies have increased their office buildings one after another has also fueled the rise in building prices.

○When Manhattan falls, Seoul rises by 8.7%

According to the Global Urban Composite Index (CPPI) of Real Capital Analytics (RCA), a global real estate research company on the 7th, commercial real estate prices in Seoul rose 8.7% in the second quarter of this year from the first quarter. During the same period, it was the largest increase among 18 major cities, including New York and Manhattan in the United States, Tokyo in Japan, London in the United Kingdom, and Amsterdam in the Netherlands. It also has the highest quarterly increase in commercial real estate prices in Seoul over the past decade.

The RCA evaluated the Seoul commercial real estate rise, which has been going on for two years, as exceptional. Seoul commercial real estate prices, which rose 11% over the past year, jumped 7.3% in the first quarter of this year. Here, the rate of increase in the last two quarters was even steeper.

Benjamin Chau, RCA Asia Regional Analyst, said, “In Hong Kong, Boston, and Sydney, Australia, where prices have risen sharply in the past, the rate of increase has slowed since last year. explained.

Office buildings are leading the boom in commercial real estate in Seoul. Office buildings accounted for nearly 70% of commercial real estate transactions in the second quarter, according to RCA. RCA analyzed, “In other major cities in the world, the proportion of office buildings is decreasing and the proportion of industrial real estate such as logistics centers is increasing.” In Melbourne and Los Angeles, industrial sectors such as logistics centers accounted for more than half of the total commercial real estate transaction volume in the first half of this year. On the other hand, in Seoul, the industrial sector accounts for about 7% of the total transaction volume. In Manhattan, where the proportion of office buildings is large, real estate prices have declined due to the spread of telecommuting.

○ Let’s regulate housing demand, ‘Little Building’ is popular

The RCA prioritizes liquidity as the background to the world’s highest rise in office buildings in Seoul. As the Korean government strengthened tax policies on the housing market, investment demand from individuals and institutions rushed to office buildings.

Private equity funds and pension funds are also increasing the proportion of real estate investment. In particular, institutional investors have been investing in large office buildings such as Gangnam and Magok in Seoul and Pangyo in Gyeonggi this year. This is because the office vacancy rate in these regions is less than 5%, which means that stable dividends and high value can be expected in the future. An official from a pension fund said, “Gangnam apartments are going to exceed 100 million won per 3.3 square meters and go towards 200 million won, but office buildings in Gangnam have exceeded 40 million won per 3.3 square meters. There is,” he said.

As the upside potential of office buildings grows, individual investors are also jumping in. Last month, more than 19 trillion won of personal funds flowed into the SK REITs (real estate investment company) public offering containing the Seorin Building, the headquarters of the SK Group. Joo-Hwan Kim, CEO of One Building Real Estate Brokerage, said, “When you buy an apartment in Gangnam that costs 2 billion won, you don’t get a loan, but you get a 50 to 60 percent loan for a ‘small building’ (5 stories or less) that costs 2 billion won. The low level is also the reason why investors flock to it.”

The real estate industry expects the price of office buildings in Seoul to rise further. According to RCA, the average sale price per 3.3 square meters is 37.14 million won in the Gangnam area of ​​Seoul, which is half of Singapore (74.29 million) and London (78.42 million).

An asset management company official said, “It remains to be seen whether the price increase will continue, but it is true that office building prices in Seoul are still lower than in other cities. It should be noted that each region is differentiated,” he said.

By Yoon Ah-young, staff reporter [email protected]

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