Korean firms increase share in domestic office market

The International Finance Center in Seoul (IFC Seoul) drew interest from only six bidders at the end of last year, and Singapore-based ARA Korea was the only foreign bidder.

Mirae Asset Management Co. bought the complex for 4.1 trillion won ($3.3 billion) last month, the largest real estate deal in South Korea so far this year.

Last month, ARA Korea completed the sale of Alpharium Tower I and II in Pangyo to Mastern Asset Management for 1.02 trillion won. The sale price was 30 million won per 3.3 square meters, the highest-ever office price per unit area in Pangyo, the so-called Silicon Valley of South Korea.

ARA Korea is the Korean branch of Singaporean investment firm ARA Asset Management Ltd.

Domestic real estate investment firms have been rapidly expanding their presence in South Korea’s commercial real estate market during the pandemic.

Foreign investors accounted for 2.5% of South Korea’s commercial real estate transactions, including office buildings, as of the end of May this year, down from 22.3% in 2018, according to Colliers, a real estate consulting firm.

During the same period, domestic asset management firms increased their share after buying the properties from global investors and domestic institutions. 

IGIS Asset Management is the largest investor with 33 buildings in the country as of the end of last month, according to Real Capital Analystics. Koramco Asset Management came second with 32 office buildings and Mastern Asset holds 24 office buildings in the country.

Singapore’s GIC holds eight office buildings in Korea, while ARS and Angelo Gordon each own four buildings in the country.  

The size of Mastern Asset Management’s real estate funds reached 6 trillion won as of the end of last month, up 150% since March 2020. IGIS Asset Investment’s assets also have been up 30% during the same period.

Some top local asset managers have significantly ramped up their real estate fund size during COVID-19 due to difficulty in conducting due diligence for foreign investors amid expectations of high returns in the low-interest rate era.  

Meanwhile, Korean asset managers have invested a combined $4.2 billion in the US real estate market, the largest-ever figure for their US real estate investment.

The share of real estate investment trusts (REITs) is also growing in South Korea’s real estate market. REITs accounted for about 8% of real estate transactions in 2021, up from 3% in 2020.

Write to Tae-Ho Lee at thlee@hankyung.com
Yeonhee Kim edited this article.