As Regulations Slow Housing Transactions, Commercial Real Estate Experiences a Spillover Effect

March Commercial and Office Building Transactions
Increase of 20.6% Compared to Same Month Last Year

Office facility cluster area near Gwanghwamun

As the government's successive high-intensity housing regulations block investment demand for apartments and the like, the commercial and office real estate market is enjoying a ripple effect.

According to the Korea Real Estate Board on the 26th, the transaction volume of commercial and office buildings nationwide last month recorded 32,839 cases, showing a 20.6% increase compared to 27,220 cases in the same month last year. During the same period, Seoul increased by about 10.5%, from 6,171 cases to 6,818 cases.

On the other hand, the transaction volume of residential real estate shrank significantly. Based on Seoul, the transaction volume of residential buildings decreased by about 30%, from 24,483 cases in March last year to 17,132 cases this March. Nationwide, it recorded 147,786 cases in March, down 7.7% compared to 160,156 cases in March last year.

It is analyzed that investors are flocking to income-generating real estate, which has fewer regulations and can expect decent returns compared to the housing market such as apartments. Officetels are representative. Officetels recorded 161,642 transactions last year, an increase of 7.85% compared to 149,878 cases in 2019.

Average sale prices are also steadily rising. Last month, the average sale price of officetels increased by 15.5% nationwide, 14.1% in the metropolitan area, and 25.8% in provincial areas compared to the same month last year. This is a growth rate comparable to apartments (nationwide 18.8%, metropolitan area 19.3%, provincial area 16.8%).

Medium to large officetels for residential purposes have consistently gained popularity as alternative products to apartments, and recently, small officetels have also been attracting attention. In February, Hyundai Engineering's ‘Hillstate Cheonggye Central’ officetel in Hwanghak-dong, Jung-gu, Seoul, recorded a competition rate of 12.7 to 1 with about 6,640 applicants for 522 units. This officetel mainly consists of small units with exclusive areas of 34 to 51㎡.

‘Sejong Richensia Familier,’ supplied by Kumho Industrial and Shindongah Construction in Sejong City, recruited only 217 units but received 6,711 applications, showing a competition rate of 30.7 to 1. It was supplied only with small units (exclusive area 20 to 35㎡). Kim Byung-gi, team leader at Realhouse, explained, "As the proportion of single-person households increases, the residential demand for small officetels is also increasing accordingly."

Meanwhile, the outlook for the domestic commercial real estate market this year is also bright. According to the ‘2021 Korea Investor Intention Survey’ report released last month by CBRE, a global comprehensive real estate services company, 53% of domestic investors responded that "they intend to purchase more commercial real estate this year than last year." CBRE stated, "This appears to reflect the economic recovery trend observed since the second half of last year along with expectations for COVID-19 vaccine distribution," and forecasted that active buying of commercial real estate will continue this year as well.

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