Korea’s commercial property market has hit bottom and transactions of commercial buildings are likely to revive if the nation’s central bank gives a clear indication of cutting its key interest rate, according to a senior executive at CBRE, a global commercial real estate services company, Monday.
Lim Dong-soo, managing director of CBRE Korea, projected demand for office spaces will remain steady in Korea this year amid increased liquidity in the investment market.
In a recent interview with Yonhap News Agency, Lim said the rebound will take place once central banks in the United States and other countries begin to cut interest rates this year.
“The first rate cut will be likely in May,” Lim said citing a recent CBRE report, without elaborating further.
“Lack of supplies (in the domestic office market) in the past several years has pushed up office space rental fees and driven down office vacancy rates, which is generally positive for the commercial real estate market,” he said.
According to the CBRE Asia Pacific Office Occupier Survey, the percentage of companies expecting to expand their office size jumped to 61 percent in 2023 from 43 percent a year earlier, while the proportion of firms planning to reduce their office size fell to 30 percent from 37 percent.
Based on the high return to office rate in Seoul after the COVID-19 pandemic, demand for expansion is set to continue along with the need for flight-to-quality relocation, the survey said.
In particular, Seoul Grade A office rents, which have registered high double-digit annual growth since 2022, are expected to continue rising this year. Intensifying competition for space due to limited supply will likely push up rents throughout 2024, CBRE said.
In other factors that will buoy the commercial property market, “Korean companies (traditionally) do not prefer to see their employees working from home so many workers have returned to the office following the pandemic,” Lim said.
And local companies increasingly operate offline stores in order to strengthen their brand awareness and promote their products rather than to increase sales, he said. Source: Yonhap
