Richard Hwang, managing director at Cushman & Wakefield Korea / Courtesy of Cushman & Wakefield Korea
Korea's real estate market is anticipated to attract a remarkably diverse range of investors in 2025. This includes retail investors, pension funds, foreign companies, and international investors, all of whom are expected to play a significant role in the market's growth, according to Richard Hwang, managing director at Cushman & Wakefield Korea.
The Korean branch head of the global real estate services firm also said alliances and partnerships between investors and developers are likely to increase, while more domestic companies, especially those in the beauty and culture industries, are expected to expand their presence in international markets.
During a recent interview with The Korea Times, Hwang noted that high-net-worth individuals, investing tens of billions of won, are increasingly focusing on the real estate market.
“For example, when a corporation acquires a building, these individuals are expected to participate actively by taking subordinate positions in structured deals,” he said.
In addition, investors are expected to have opportunities to participate in private rental housing developments, driven by initiatives such as a pilot project for long-term private rental housing tailored for seniors, which is set to move forward.
“Institutional and retail investors are showing interest in these projects. Historically, institutional and professional investors in the housing sector have focused primarily on pre-sale projects. However, new markets are attracting different types of capital,” he said.
“Foreign companies may also invest, which leads me to believe that the real estate market could see the most diverse range of investors in its history.”
Hwang highlighted alliances and partnerships as another trend to watch.
Until now, housing development projects could be initiated with just 5 percent of the land cost. However, starting next year, developers will be required to secure at least 20 percent of the necessary capital.
Under existing regulations, construction companies have been able to secure loans from banks by agreeing to a completion guarantee. But the government is now changing this approach.
“It is rare in the real estate market to find a single entity that possesses both sufficient capital and expertise,” Hwang said. “As a result, similar to practices seen abroad, investors with capital and developers are likely to form alliances and engage in joint development.”
Apartments and other buildings are seen in Seoul, Tuesday. Yonhap
Addressing the increasing political and economic uncertainties both domestically and internationally, Hwang noted that domestic companies are likely to feel the impact of anticipated high-tariff policies under the incoming Donald Trump administration in the United States. Given Korea's export-driven economy, the commercial real estate market — including office and retail sectors — will be significantly influenced by the strength of key factors such as GDP growth.
In addition, as real estate is heavily influenced by borrowing rates, it will be important to closely monitor the real interest rate. Even if the base rate decreases, there is still a spread, making it important to observe how much the real interest rate actually falls.
“In the United States, even though the base interest rate was lowered, the actual mortgage rate for housing is still above 7 percent. As a result, housing transactions have been sluggish, and prices remain weak,” Hwang said.
“In Korea as well, while the base rate has been lowered, I believe that it will take until the first half of next year for the real rate to decrease. Only then, we could expect a boom in the office sector.”
But the challenges in the retail sector are likely to persist for the time being, given that institutional investors, who parked their money in the retail market during the COVID-19 pandemic, did not achieve good returns, resulting in a cautious outlook for the sector moving forward.
“Department stores and supermarkets have been facing declining sales due to the rise of e-commerce platforms, resulting in poor performances by key tenants. Therefore, I anticipate that the retail sector will continue to struggle,” he said.
“From the perspective of suppliers in the retail sector, it is also likely to be challenging to pursue aggressive supply strategies in the current environment.”
Given the rising won-dollar exchange rate, Hwang recommended that expanding overseas and conducting business locally would be beneficial. In particular, companies in the beauty and culture sectors with a strong domestic presence should actively explore international expansion opportunities.
He noted that as Korea continues to gain significant global attention for K-culture and K-beauty, many cosmetic surgery and dermatology clinics have already expanded to countries such as Japan, China, and Singapore.
Shoppers check items at Hyundai Department Store's pop-up store, featuring the Korean fashion brand Noice, at Shibuya Parco in Tokyo in May. Courtesy of Hyundai Department Store
“In Japan, for example, it is often cheaper for people to visit Korean dermatology clinics than to receive services in their home country, as service prices in Japan are quite high,” he said. “Therefore, if Korean companies enter the Japanese market and offer services at reasonable prices, they are likely to have a competitive advantage.”
As the number of Korean companies expanding overseas grows, so does the value of their assets abroad, driving an increasing demand for more advanced management of these assets. As a result, Cushman & Wakefield Korea, which previously focused primarily on providing real estate services to companies entering Korea from the U.S. or Europe, is now placing greater emphasis on serving domestic companies.
“Our services include consulting and execution. For example, many companies in need of production facilities in the U.S. are looking to acquire factories or warehouses. We are strengthening our outbound services to assist these companies in acquiring such properties,” he said.
He added that his company is exploring collaboration opportunities with IT companies, particularly in the fields of artificial intelligence and smart mobility solutions, to offer more advanced and sophisticated real estate services.