RCA: logistics sector and secondary markets favoured by South Korean within Europe

Central and Eastern Europe has attracted $1.2 billion in spending while Luxembourg, Ireland and Belgium have also been targets. In total, South Korean investors have invested around $10 billion (€9.1 billion) on European real estate in the year to-date, dwarfing the $6.5 billion in investments in 2018.

Tom Leahy, RCA’s Senior Director of EMEA Analytics, explains:

“South Korean cross-border real estate investments in Europe and globally are already at an all-time peak, but this doesn’t mean that the main focus of these flows won’t switch again. Mirae Asset’s victory in the bidding war for Chinese insurer Anbang’s luxury U.S. hotel portfolio, and other deals in the pipeline, might signal the U.S. market is back in play as viewed from Seoul.

“Brussels, a market not often on the radar of global investors, has proved more compelling to South Korean player due its relative stability and an occupier base oriented towards the public sector.” 

The latest such deal in the Belgian capital, which is still in contract, is the acquisition for $1.4 billion of the Finance Tower, a 2.4 million sq ft (220,000 sqm) office let to the Belgian government until 2031.  The buyer is a join venture between a U.K. investment manager and two South Korean firms, AIP AM and Meritz Securities. If and when this deal completes, it will be by far the largest ever single property trade in Belgium.

The South Koreans’ shift into global markets first started in 2011-12 after rising allocations towards real estate by institutional investors had driven prices and volumes in their local market to record highs.

The move overseas was led by pension fund NPS which initially purchased assets in the U.S. and U.K. – the traditional first ports of call for Asian capital going global. However, flows really picked up in 2015, when South Korean investors spent more than $3 billion in the U.S. and over $2 billion in Europe, primarily in Germany and Austria.

This first wave was led by public money and then by the larger institutional investors, primarily the insurance funds run by the likes of Samsung, Hyundai and Hanwha. The investor base has since broadened markedly, reflecting the depth of capital in South Korea, the scale of demand and the drive to diversify.

Real Capital Analytics has recorded 22 South Korea-based investors who have spent more than $1.0 billion in the global real estate markets in the last five years.

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