'Cold Wind Blowing' Commercial Market... Decline in Investment Returns

Sangga Information Research Institute "Last Year, Investment Returns for Medium-Large, Small, and Collective Commercial Properties Fell Compared to the Previous Year"
Impact of Domestic Demand Slump... Delivery App Activation Also Played a Role

[Asia Economy Reporter Onyu Lim] Last year, the average investment returns for commercial properties nationwide declined across all sizes, including medium-large, small, and collective units. This is analyzed as a continuation of the frozen atmosphere in the commercial property market due to the ongoing domestic economic downturn. There are also forecasts that the investment returns for commercial properties will decrease further in the first quarter due to the impact of the novel coronavirus disease (COVID-19).

According to the Commercial Property Information Research Institute on the 17th, the average investment returns for commercial properties nationwide all fell compared to the previous year. The average investment return for medium-large commercial properties nationwide was 6.29%, down 0.62 percentage points from 6.91% in 2018. Seoul’s medium-large commercial property investment return also dropped by 0.3 percentage points from 8.2% the previous year to 7.9%. Apart from regions such as ▲Gwangju (increase of 0.02 percentage points) ▲Daejeon (increase of 0.51 percentage points) ▲Jeonnam (increase of 0.13 percentage points), investment returns for medium-large commercial properties decreased in other regions.

Investment returns for small-scale commercial properties also declined. The average investment return for small-scale commercial properties nationwide was 5.56%, down 0.79 percentage points from 6.35% the previous year. Except for ▲Daejeon (increase of 0.77 percentage points) and ▲Jeonbuk (increase of 0.1 percentage points), investment returns fell in all other regions nationwide.

The same trend was observed for collective commercial properties. In 2019, the average investment return for collective commercial properties nationwide was 6.59%, down 0.64 percentage points from 7.23% the previous year. Except for ▲Daejeon (increase of 0.47 percentage points) ▲Sejong (increase of 0.17 percentage points) ▲Jeonnam (increase of 0.08 percentage points), investment returns declined in other regions.

Researcher Hyuntaek Cho of the Commercial Property Information Research Institute stated, "The ongoing domestic economic downturn and the recent increase in the use of social commerce, delivery applications, and secondhand goods applications have dealt a significant blow to offline store sales. As a result, commercial property vacancies have increased nationwide, which has also affected investment returns."

He added, "Furthermore, with the spread of the COVID-19 virus this year, investment returns for commercial properties are expected to decline even more in the first quarter," forecasting the commercial property market.

This content was produced with the assistance of AI translation services.