Optimism for South Korea’s Commercial Property Market, According to CBRE

SEOUL - The commercial property market in South Korea is showing signs of recovery, with projections indicating a potential revival in transactions of commercial buildings. This optimism is tied to expectations that the nation's central bank might signal a reduction in its key interest rate. Lim Dong-soo, managing director of CBRE Korea, shared these insights, suggesting that demand for office spaces in South Korea will remain steady throughout the year, buoyed by increased liquidity in the investment market.

According to Yonhap News Agency, In an interview with Yonhap News Agency, Lim forecasted that a rebound in the commercial real estate market could occur once central banks, including the United States and others, begin to cut interest rates later this year. He hinted at a possible rate cut by May, referencing a recent report by CBRE. The anticipation of easing monetary policy is seen as a positive development for the commercial real estate sector, which has experienced increased office space rental fees and reduced vacancy rates due to a lack of supply in recent years.

The CBRE Asia Pacific Office Occupier Survey highlighted a growing trend among companies to expand their office space, with 61 percent of respondents in 2023 indicating plans to increase their office size, up from 43 percent the previous year. This trend is supported by a high return-to-office rate in Seoul post-COVID-19 pandemic, along with a continuing demand for flight-to-quality relocation.

Furthermore, Seoul's Grade A office rents, which have seen significant annual growth since 2022, are expected to continue rising due to the competitive demand for space. Lim also noted cultural factors, such as Korean companies' preference for in-office work and the increasing operation of offline stores to boost brand awareness, as contributing to the sector's recovery.

CBRE's forecast also points to a resurgence in offline retail, spurred by a consumer desire for experiences, which is expected to lead to solid growth in the retail sector this year. As the floating population in Seoul increases, vacancy rates in major commercial districts are anticipated to decline, continuing the recovery trend initiated after the pandemic's peak in 2021.

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