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More office buildings up for sale amid downturn

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By Jhoo Dong-chan

An increasing number of landmark office buildings in downtown Seoul have been up for sale amid an economic slowdown. Not only offices but also local shopping malls and hotels are now on offer, but they are experiencing difficulties in finding buyers due to growing concerns over the future of the nation's economy.

Industry insiders said domestic commercial real estate operators are now eyeing logistics assets such as warehouses and distribution centers reflecting the rapid growth of the nation's e-commerce market.

According to sources, 13 major office buildings in downtown Seoul have been put up for sale as of the end of August. Each is worth more than 200 billion won ($166.6 million).

Of the 13 buildings, Seoul Orange Life Center was put on sale for the first time in 12 years. The sale price is estimated at around 200 billion won.

Namsan Square building is also available for the first time in 10 years. The building's estimated sale price is expected to be about 450 billion won.

Tmark Grand Hotel Myeongdong, which is worth up to 250 billion won, is also on offer.

There are also a number of buildings on sale around the Yeouido area. Parc 1 Tower Two, which is believed to be worth more than 1 trillion won, was placed on sale. Along with the Parc 1 building, Samsung Life Yeouido, Yeongdeungpo Times Square and Sindorim D-Cube City were also recently put on sale.

"Now is the right time to sell office assets especially considering the nation's low interest rate trend," local real estate agent Kim Byoung-joon said.

"The real estate market is highly correlated to interest rate. The lower the rate is, the higher the return investors can expect. What really matters here is, however, the current economy. If the downturn prolongs further, these buildings could suffer a growing vacancy rate. I fear it is already happening."

According to data submitted by the Ministry of Land, Infrastructure and Transport, the office vacancy rate of Gangnam-daero and surrounding areas in Seoul was 18.5 percent last year, up 8.4 percentage points from its 2013 figure of 10.1 percent.

Industry insiders said domestic commercial real estate service firms are now eyeing logistics assets instead of offices in the metropolitan area.

"Online purchases account for about 20 percent in Korea. The figure will grow dramatically in the near future. For e-commerce firms, it's inevitable to come up with a fleet of warehouses in the metropolitan area to meet surging customer demand. The market is very promising," a JLL Korea official said.

JLL Korea is a regional corporate body of Jones Lang LaSallea (JLL), a U.S.-based global services firm specializing in real estate and investment management.

"The return rate from investment in the nation's warehouse real estate market has reached more than 6 percent due to the boom in Korea's e-commerce market. We believe there is still room for growth because more people will buy things online in the future."


Jhoo Dong-chan jhoo@koreatimes.co.kr


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