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South Korea Real Estate Report Q1 2011


South Korea Real Estate Report Q1 2011

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Additional Information
Price $530.00
Meta Description No
Publisher Business Monitor International
Date of Report Aug 1, 2011
Quick Overview
Key Insights On The Real Estate Sector Of South KoreaSouth Korea is an unusual country in that protagonists in the commercial real estate sectors of two of itsmajor cities – Seoul and Daegu – were apparently unaffected by the global financial crisis and thesubsequent downturn in world trade.
In early 2010, our in-country sources indicated that developers in those two cities, whether as a result ofgood luck or good management, had been able to maintain a broad balance between supply and demandof 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 thatfavour landlords.
Busan is an exception in that developments in its commercial real estate sector are far more similar tothose in most other countries that BMI surveys. Our in-country sources indicated that rents fell sharply inall three sub-sectors in 2009. Capital values fell further, with the result that yields actually rose. The mainproblem appears to be a huge increase in supply as a result of new projects that are becoming available tonew 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 we conducted in mid-2010, thecomments confirmed our previously held view: 2009 had been the year of adjustments, in response to thediffering conditions in the three cities’ real estate markets. Since the beginning of 2010, rents have fallenslightly in the retail sub-sectors, but otherwise appear to have tracked sideways. Looking forward towards2015, we continue to believe that yields will remain broadly unchanged. Any changes in rental rates willlikely be met by similar changes in capital values.
Table of Contents
Executive Summary ........................................................................................................................................ 5
SWOT Analysis ................................................................................................................................................ 6
South Korea Real Estate SWOT ............................................................................................................................................................................ 6
South Korea Economic SWOT .............................................................................................................................................................................. 6
South Korea Business Environment SWOT ........................................................................................................................................................... 7
Regional Real Estate Overview ....................................................................................................................... 8
Table: Asia Pacific’s Office Markets At A Glance – Rents, 2009-2011 (US$ per square metre per month) .......................................................... 8
Table: Asia Pacific’s Retail Markets At A Glance – Rents, 2009-2011 (US$ per square metre per month) ......................................................... 10
Table: Asia Pacific’s Industrial Markets At A Glance – Rents, 2009-2011 (US$ per square metre per month)................................................... 12
Real Estate Market Overview ........................................................................................................................ 14
Key Issues ........................................................................................................................................................................................................... 14
Comments and Data from In-Country Sources ................................................................................................................................................... 14
South Korea’s Real Estate Market – Rentals 2008 And 2009 (m²/month, US$) ................................................................................................... 15
South Korea’s Real Estate Market – Net Yield (%) ............................................................................................................................................. 15
South Korea’s Real Estate Market – Terms of Contract/Lease ............................................................................................................................ 16
South Korea’s Real Estate Market – Available And Vacant Space (m², unless otherwise stated) ........................................................................ 16
Forecast Scenarios ....................................................................................................................................... 17
Supply and Demand ............................................................................................................................................................................................ 17
Rents and Yields .................................................................................................................................................................................................. 18
Table: South Korea Real Estate Markets – Rentals in m²/month, 2009-2011 (US$) ............................................................................................ 19
Table: South Korea’s Real Estate Market – Net Yield, 2009-2015 (%)................................................................................................................ 20
South Korea’s Construction Industry Outlook ......................................................................................................................................................... 20
Table: South Korea Construction And Infrastructure Industry Data, 2007-2015 ................................................................................................ 20
Table: South Korea Construction And Infrastructure Industry Data, 2012-2020 ................................................................................................ 22
Construction and Infrastructure Forecast Scenario ................................................................................................................................................. 23
Macroeconomic Outlook ..................................................................................................................................................................................... 25
South Korea – Economic Activity, 2008-2015..................................................................................................................................................... 26
Business Environment ................................................................................................................................. 27
Real Estate/Construction Business Environment Ratings ................................................................................................................................... 27
Table: Asia Real Estate/Construction Business Environment Ratings ................................................................................................................. 27
South Korea’s RECBER ...................................................................................................................................................................................... 28
Project Finance Ratings: Outlook For Asia Pacific ............................................................................................................................................ 29
Table: Design And Construction Rating ............................................................................................................................................................. 31
Table: Commissioning And Operating Rating .................................................................................................................................................... 32
Table: Overall Project Finance Rating ............................................................................................................................................................... 33
South Korea’s Business Environment ................................................................................................................................................................. 34
Table: BMI Business And Operational Risk Ratings ........................................................................................................................................... 35
Table: BMI Legal Framework Ratings ............................................................................................................................................................... 37
Table: Annual FDI Inflows Into Asia, 2006-2008 ............................................................................................................................................... 44
Table: BMI Trade Ratings .................................................................................................................................................................................. 46
Table: South Korea’s Top Export Destinations, 2000-2008 (US$mn) ................................................................................................................. 47
Company Monitor .......................................................................................................................................... 49
GS Engineering & Construction Corporation..................................................................................................................................................... 49
Samsung Engineering & Construction ................................................................................................................................................................ 50
SK Engineering & Construction ......................................................................................................................................................................... 51
BMI Methodology .......................................................................................................................................... 52
How We Generate Our Industry Forecasts ......................................................................................................................................................... 52
Construction Industry ......................................................................................................................................................................................... 53
Bank Lending ...................................................................................................................................................................................................... 54
Real Estate/Construction Business Environment Rating ..................................................................................................................................... 54
Table: Weighting Of Indicators .......................................................................................................................................................................... 55
Project Finance Ratings Indicators .................................................................................................................................................................... 57
Table: Design And Construction Phase .............................................................................................................................................................. 57
Table: Commissioning And Operating Phase – Commercial Construction ......................................................................................................... 58
Table: Commissioning And Operating Phase – Energy And Utilities .................................................................................................................. 59
Table: Commissioning And Operating Phase – Transport .................................................................................................................................. 60
Sources ............................................................................................................................................................................................................... 61




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