As one of the developed economies in the Asia Pacific region, South Korea has recently experienced an explosive growth in the commercial real estate market during the last decade. Commercial real estate traded during the 2019 has increased 25% YoY, again reaching its peak, compared to 2018 when it recorded its highest transaction volume of $13 billion. This is mainly due to comparably high yields, favorable foreign investment regulations and its future economic outlook. Despite its boom in the commercial real estate market, listed REITs, like the NH Prime REIT itself, only recently have emerged in South Korea. The previous growth was driven by private(non-listed) investment vehicles accessible only to a limited investors such as large institutions, endowment funds and pension funds, resulting in depreciation of the valuation of invested assets due to higher required return from these investors. The emergence of major listed REITs and its continuous growth signals that the commercial real estate market has entered into a new growing phase. It has opened up a window to a new capital inflow from retail investors. With relatively lower required return from these retail investors, appreciation in the valuation of real estate assets would encourage sponsors to divest their assets to sponsoring REITs. The shift in the market would eventually further expand the market as new investment opportunities arise.
Global REITs Market
- Global listed REITs market is expanding, mainly in developed countries
- Market cap. of listed K-REITs relatively low compared to that of other countries → prospective growth of listed K-REITs market is highly expected
- Previous K-REITs market experienced continuous growth, driven by private REITs
- Recent change in regulations and investment market trend has led to a rapid escalation of large-scale K-REITs IPOs