Shift in Investment Focus
The focus of foreign real estate investment by Korean companies is shifting rapidly from the US to Europe. This is because investors are feeling that the US market, which entered an interest rate hike period, is now at its peak, while Europe, which is expected to maintain a low interest rate until the end of next year, has great growth potential.
According to experts of the investment banking industry on August 3, Korean securities firms and pension fund managers have invested more than 4.5 trillion won (US$4.05 billion) in investment assets in Europe including the UK, Belgium and Germany. Most of the investment went to office buildings in central business districts that can generate stable rent income. Some securities firms are focusing on buildings that are leased by governments for more than 15 years or popular hotels.
In Europe, London was evaluated as a hot investment destination as the city saw the burden of property price hikes decrease and the British pound was depreciated. Another reason was that prices fell as financial companies in the UK moved to Germany among others. This background led Mirae Asset Daewoo and the National Pension Service of Korea to purchase office buildings in London.
UK offices' return on investment is in the upper 6-percent range per annum. They quickly absorbed US real estates whose investment attractiveness declined due to a basic rate hike. Mirae Asset Daewoo and NH Investment & Securities invested 370 billion won (US$333 million) in March to acquire Canon Bridge House, an office building located in London's financial center, City of London. In June, Korea Investment & Securities purchased 70 Mark Lane Office Building in London's financial district for 300 billion won (US$270 million). Hana Financial Group also bought a shopping mall near the city of Birmingham in southern England for about 260 billion won (US$234 million). The National Pension Service of Korea recently bought Goldman Sachs’ London headquarters building for 1.7 trillion won (US$1.51 billion).
Recently, investors have been diversifying their investment targets into properties in Belgium and Germany and others. "Prices in the UK have risen naturally since funds flew into the UK, and demand is growing in Germany and Beligium as the two markets have a lot of key tenants including major corporations," said an official of the Korean IB industry.