This year, the transaction size of the domestic commercial real estate market is expected to be similar to or slightly increase compared to last year.
Global integrated real estate service corporation CBRE Korea noted on the 24th that it has published the '2025 domestic commercial real estate market outlook report' containing this information.
According to the report, the commercial real estate market this year is expected to contribute to the transaction size as many projects that have been adjusting their timing to enter the market will come to fruition with expectations of additional interest rate cuts.
In particular, in the office sector leading the market, around 45 major transactions are either underway or scheduled this year, covering approximately 610,000 pyeong in total floor area. The logistics market is also expected to expand core asset transactions, supported by eased supply risks, maintaining investment size at a level similar to last year. Additionally, the hotel market is expected to continue to exhibit investment interest and growth due to increases in the number of domestic tourists, investments aimed at changing the use of assets, and the asset securitization by domestic large corporations.
By sector, the office market is likely to continue facing a supply shortage in the A-grade office market of Seoul's three major business districts (downtown, Gangnam, Yeouido). With supply restrictions in key areas, the growth of emerging business districts such as the Magok office market, which will see a large supply of leasing-type offices in the first half of this year, is expected to stand out.
The retail market recorded its first negative growth last year since the expansion of COVID-19 in 2020, and the trend of consumption contraction due to poor domestic demand is expected to persist into 2025. However, the increase in foreign tourist inflows is expected to partially offset the overall market risk, contributing to the activation of street commercial districts and the medical retail market. Traditional commercial districts, such as Myeongdong, have shown signs of recovery, with recent declines in vacancy rates and slight increases in rents, while emerging commercial districts like Seongsu and Yongsan have demonstrated continued demand with low vacancy rates and significant rent increases; however, growth disparities based on the characteristics of other regions are widening.
The logistics market is expected to see a significant decrease in supply volume in 2025, alleviating the concerns associated with large supply volumes in 2024, and the overall vacancy rate, including ambient and cold storage, is forecasted to improve from 23% last year to about 19%. The vacancy risk in the logistics market is expected to vary by region, with Ansan, which has become the third largest logistics market in the metropolitan area, leading more than 30% of the total supply this year.
In 2024, the transaction size of the commercial real estate market was recorded at approximately 22 trillion won, surpassing the previous maximum of 21 trillion won recorded in 2021 and reflecting an increase of about 49% compared to 2023. Approximately 13 trillion won worth of transactions occurred in the office sector, accounting for about 60% of the total transaction size. The office market showed a high proportion of large deals focused on domestic investors, with a total of 32 large transactions exceeding 100 billion won, representing 11 trillion won out of the total transaction size of 13 trillion won. Following this, the logistics sector recorded about 5 trillion won, with the hotel and retail sectors recording approximately 2 trillion won each, driving market growth.
Choi Soo-hye, managing director of research at CBRE Korea, noted that "2025 is expected to be a year of dual challenges, including growth deceleration, a contraction in the employment market, global economic recession, domestic political uncertainties, and sluggish domestic demand." He added, "This year, the commercial real estate market is expected to see a further recovery in investment sentiment due to expectations of interest rate cuts, but factors such as the price expectations gap between sellers and buyers, rising costs, and economic uncertainties are likely to make investment decisions more cautious."