Cushman & Wakefield Korea: Offices and Hotels to Remain Stable
Offices a Landlord-Favored Market, Retail Shows Clear Sales Polarization
Cushman & Wakefield Korea has released its "2025 Commercial Real Estate Market Outlook Report."
According to the report, the commercial real estate market saw active transactions in 2024 as expectations of interest rate cuts were priced in ahead of time. The office market posted strong performance on the back of stable rents and yields, while logistics centers continued to see transactions involving prime facilities and NPLs despite oversupply concerns.
Driven by supply and demand, the trends seen in offices, logistics centers, and hotels in 2024 are expected to carry over into 2025. Offices are expected to remain a landlord-favored market, while logistics centers continue as a tenant-favored market. For hotels, tourist numbers have recovered rapidly while the number of guest rooms has failed to meet demand, so room rates are expected to rise further. In retail, facilities that enhance the customer experience are drawing attention, while weakening consumption is expected to make sales polarization by facility and commercial district even more pronounced.
Investment - The office transaction market, which had been in a downturn due to high interest rates since the second half of 2022, entered a recovery phase in 2024 with stable cap rates in the 4% range. In 2025, transactions of Grade A or higher offices and mid-to-large-sized headquarters buildings are expected to continue, including strategic investments (SI), asset securitization deals, and value-add investments.
Office - In the commercial real estate market, offices are regarded as prime assets thanks to their stable rents and yields, and this trend is expected to continue through 2025. In particular, preference is expected to persist for the GBD (Gangnam Business District), which offers a business environment well-suited to IT firms and startups. As rents surge in major business districts, some companies are being observed preparing to relocate to other districts such as Magok, which raises the possibility that the pace of rent increases will gradually slow.
Logistics Centers - For logistics centers, interest from overseas investors in prime assets is increasing, while NPL (non-performing loan) transactions involving distressed assets continue, so gaps in transaction prices by asset type and region are expected to persist steadily. With oversupply continuing through 2023, restoring the balance between supply and demand is expected to take time, and there is a growing possibility of cases in which cold-storage centers are converted to ambient-temperature facilities. Until supply and demand reach equilibrium, rents are expected to hold at current levels, with variation by asset.
Hotels - As hotel demand expands with the rise in tourist numbers, a shortage of guest rooms during peak season is expected to persist. With supply falling short of demand, occupancy rates (OCC) and average daily rates (ADR) continue to rise, improving operating performance. Against this market backdrop, 2025 is expected to see a modest increase in 3- to 4-star hotels in Seoul along with active transactions.
Retail - In retail, the sales gap between facilities and commercial districts has been deepening. Strategies that meet consumer demand—such as pop-up stores and experiential content targeting high-end and younger consumers—are translating into higher sales, whereas assets recording poor sales are more likely to be traded for the purpose of repurposing.
Meanwhile, Cushman & Wakefield (NYSE: CWK) is a leading global commercial real estate services firm for property owners and occupiers, with approximately 52,000 professionals across roughly 400 offices in 60 countries worldwide. In 2023, it recorded revenue of USD 9.5 billion across its core service lines, including property, facilities and project management, leasing, capital markets advisory, and valuation. The firm has also received numerous industry and business honors for its award-winning corporate culture and its commitment to diversity, equity and inclusion (DEI) and environmental, social and governance (ESG), among others. More information is available on the company's corporate website.