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South Korea Real Estate Report Q1 2012
Business Monitor International, Nov 2011, Pages: 55
Business Monitor International's 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.
HIGHLIGHTS
While BMI's core view is not for a double-dip global recession, but for a hard landing in China and weak growth in developed countries in 2012, such a scenario does still not bode well for an export economy such as South Korea's. Combine this scenario with weakening capital investment growth in the manufacturing and construction industries, and rising household debt stifling private consumption and it is easy to understand why BMI is projecting below-consensus GDP growth of 4.1% in 2012, compared to an average of 5.2% between 2000 and 2007.
For the real estate industry, the outlook is far more moderate, and BMI forecasts that the sector will grow steadily to 2016. In the near term, the industrial and retail sectors may feel the pinch of economic gloom, with certain industries seeing stagnant growth amid weakened export demand and some retailers being squeezed by cautious consumers. Yet rental rates are high and vacancy levels low in Seoul's fashionable shopping districts, while new multi-faceted store concepts and convenience shopping require new space or upgrades to existing buildings. In the industrial sector, the shipbuilding city of Busan appears to be floating above the woes of the wider manufacturing industry, shaped by confident real estate dynamics.
If you are a tenant looking to buy or relocate to premium and grade A office space, then the market in Seoul's business districts is in your favour. There is an abundance of new supply coming online to the end of 2012, coupled with demand that cannot keep up, making rental rates very competitive.
Down the line, the industrial sector should expect to benefit from the Korean-US free trade agreement that was ratified in October 2011, which is hoped to boost trade between the two countries and deliver investment to the manufacturing sector. The Winter Olympics in Pyeongchang requires the building of a new resort, media centres and improved infrastructure, including inter-city rail routes being upgraded to high speed links.
KEY OPPORTUNITIES IN SOUTH KOREAN REAL ESTATE
- The 2018 Winter Olympics and a general upward trend in tourist arrivals should provide a longterm boon to the construction and property industries.
- The KORUS FTA should provide greater export opportunities for the Korean manufacturing sector in the medium-to-long term, which could filter down to greater retail and hospitality real estate demand and uptake.
- Seoul's high-grade office space expected to provide tenant-friendly rental rates for quality space to the end of 2012.
KEY RISKS IN SOUTH KOREAN REAL ESTATE
- Ailing demand from Korea's largest export partners and a fragile global economic outlook in 2012 offer little comfort to the export-dependent economy.
- Weakness in the residential building industry will remain a drag on overall construction industry growth.
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