"Save on Brokerage Fees"... Over Half of Commercial and Office Real Estate Transactions Are Direct Deals

Seoul downtown building forest view.
Photo by Asia Economy DB

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Last month, the number of commercial and office real estate transactions nationwide increased by 48% compared to the previous month, with more than half of these being direct transactions without involving licensed real estate agents. This is interpreted as many transactions aimed at tax savings or reducing brokerage fees amid the market downturn.

According to Real Estate R114 on the 4th, the number of commercial and office real estate transactions nationwide last month was 4,111 (2,032 in the metropolitan area, 2,079 in other regions), a 48% increase from January (2,771 transactions). By transaction type, direct transactions accounted for 2,361, while brokered transactions were 1,750.

In particular, lodging facilities showed a significantly high proportion of direct transactions at 87.2% (629 out of 721 transactions). Real Estate R114 explained, "Considering that the average exclusive area of directly transacted lodging facilities is 58㎡, which is not large, it is estimated that a considerable number of these are residential-type lodging facility transactions."

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Residential-type lodging facilities have been popular in the past due to the advantage of being free from regulations as they are not classified as housing, but recently they have been shunned by investors amid rising interest rates.

Moreover, the fact that if residential-type lodging facilities are not converted to officetels by October 14 this year, enforcement fines will be imposed has also become a burden for owners, leading many to opt for gifting or direct transactions.

On the other hand, office facilities had a low proportion of direct transactions at 25.2% (51 out of 202 transactions). Given that most transactions were in the metropolitan area where demand is relatively abundant, brokered transactions were likely easier.

Yeokyung Hee, senior researcher at Real Estate R114, explained, "Although commercial and office real estate transactions increased in February compared to January, the transaction volume is still low compared to February last year, so it is too early to judge market recovery. As general brokered transactions have become difficult, it is estimated that gifting and direct transactions have increased in provincial areas."

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