Cushman & Wakefield Korea: Offices, Hotels and Other Segments Remain Stable
Offices a Landlord's 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 in 2024 saw active transactions as expectations of interest rate cuts were priced in ahead of time. The office market showed strength on the back of stable rents and yields, while logistics centers continued to see transactions in prime logistics facilities and NPLs despite oversupply issues.
Offices, logistics centers and hotels are influenced by supply and demand, and the 2024 trends are expected to carry over into 2025. The office segment is expected to remain a landlord's market, while logistics centers are expected to continue as a tenant's market. For hotels, tourist numbers have recovered rapidly while the number of guest rooms has failed to meet demand, so further increases in room rates are anticipated. In retail, facilities that have strengthened the customer experience are drawing attention, while shrinking consumption is expected to make sales polarization by facility and commercial district even more pronounced.
Investment – The office transaction market, which had been sluggish 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 and higher offices and mid-to-large headquarters buildings are expected to continue, driven by SI (strategic investment), 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 for the GBD area, which offers a business environment well suited to IT companies and startups, is expected to persist. With rents surging within the major business districts, companies preparing to relocate to other areas such as Magok are being observed, raising the possibility that the pace of rent increases may gradually slow.
Logistics Center – For logistics centers, interest from overseas investors in prime assets is increasing, while NPL (non-performing loan) transactions of distressed assets continue, and the gap in transaction prices by asset type and region is expected to persist steadily. With oversupply continuing through 2023, restoring the balance between supply and demand is expected to take time, and the possibility of a growing number of cold-storage facilities being converted to ambient (room-temperature) use has also been raised. Until supply and demand reach equilibrium, rents are expected to remain at current levels while varying by asset.
Hotel – Amid expanding hotel demand driven by rising tourist numbers, a shortage of guest rooms during peak season is expected to persist. With supply falling short of demand, occupancy rate (OCC) and average daily rate (ADR) continue to rise, improving operating performance. Based on these market conditions, 2025 is expected to see a modest increase in the number of 3- to 4-star hotels in Seoul, along with active transactions.
Retail – In retail, the sales gap by facility and commercial district has been found to be widening. Strategies that meet consumer needs—such as pop-up stores and experiential content targeting high-end consumers and younger age groups—are leading to higher sales, while assets recording poor sales are more likely to see transactions aimed at changing their use.
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 more than 400 offices in 60 countries. In 2023, the firm recorded revenue of $9.5 billion across its core services of property, facilities and project management, leasing, capital markets, and valuation. It has also received numerous industry and business accolades for its award-winning corporate culture and its commitment to diversity, equity and inclusion (DEI), and environmental, social and governance (ESG) initiatives. More information is available on the company's corporate website.