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South Korea Real Estate Report Q4 2010
Business Monitor International, Sep 2010, Pages: 66
Key Insights on the Real Estate Sector of South Korea
South Korea is an unusual country in that protagonists in the commercial real estate sectors of two of its major cities – Seoul and Daegu – were apparently unaffected by the global financial crisis and the subsequent downturn in world trade.
In early 2010, the author’s in-country sources indicated that developers in those two cities, whether as a result of good luck or good management, had been able to maintain a broad balance between supply and demand of commercial property – and across all three major sub-sectors. Rents held up through 2009; yields fell; capital values increased, although this may at least in part have been a consequence of new tax breaks that favour landlords.
Busan is an exception in that developments in its commercial real estate sector are far more similar to those in most other countries that the authors surveyed. The author’s in-country sources indicated that rents fell sharply in all three sub-sectors in 2009. Capital values fell further, with the result that yields actually rose. The main problem appears to be a huge increase in supply as a result of new projects that are becoming available to new tenants over the next year or so. Some of the projects are under construction. Others have been built, but are unlet.
In the second round of interviews with in-country sources, which the authors conducted in mid-2010, the comments confirmed their previously held view: 2009 had been the year of adjustments, in response to the differing conditions in the three cities’ real estate markets. Since the beginning of 2010, rents have fallen slightly in the retail sub-sectors, but otherwise appear to have tracked sideways. Looking forward towards 2014, the authors continue to believe that yields will remain broadly unchanged. Any changes in rental rates will likely be met by similar changes in capital values.
Key Features of This Report
This is the latest edition of a new series of industry reports that seeks to identify the key dynamics of the real estate sectors of 44 countries around the world, some of which are developed and some of which are, in every sense, emerging markets. The questions that the report seeks to answer for each country remain as follows: what are the main issues that will matter to actors in and around real estate development in the country concerned, both over the long and the short term? What are the main constraints that they face? What are the key insights that one garners when one compares the real estate sector of the country concerned with its peers in other countries?
In Q3 the authors introduced a very substantial new improvement to the reports. They incorporated data and qualitative observations provided by commercial real estate agents operating in the countries surveyed. As a result the authors gained a much clearer picture of the balance between demand and supply in each of three main sub-sectors – office, retail and industrial. They also introduced a new approach to the forecasting of rental yields, which is discussed in the methodology sector of this report.
In Q4, the authors have incorporated a lot of new data in relation to rents and yields in 2010. They gained this data by way of a new round of interviews with their in-country sources in mid-2010. In some cases, the latest information from their sources has caused them to make significant revisions to their forecasts for 2011-2014. They asked their sources to indicate what growth in rents is likely for 2011. They explain their answers in the Industry Forecast Scenario.
South Korea Real Estate Report provides industry professionals and strategists, corporate analysts, real estate associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on South Korea's Real Estate industry.
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