"We proposed an advisory mandate to sell an asset, but heard that the client already had an advisory firm in mind. It could have been a fight we couldn't win, but I decided to approach it person to person rather than just putting forward numbers like a 10-year lease yield. Looking into the client, I found that the company was very attached to a remodeling it had led. I went to the site myself, took photos of the interior that impressed me, sketched it, and put it in the proposal. I also said that an asset that has been transformed this well should be valued highly. When the presentation (PT) began, I could see the CEO's view change. In the end, CBRE Korea was selected."Choi Seong-hyeon, vice president of CBRE Korea
Since COVID-19, as high interest rates and a recession have dragged on, Korea's commercial real estate market, which had slumped, has recently begun to stir. With trillion-won office assets coming to market one after another this year, some say the market has entered a recovery. As the market hit bottom from a peak and began to rebound, one firm consistently led in investment advisory. That is CBRE Korea.
We met with Choi Seong-hyeon, vice president of capital markets, who made a major contribution to CBRE Korea rising to No. 1 in the industry, at CBRE Korea's headquarters in Jongno-gu, Seoul, on the 13th. Choi oversees the capital markets institutional sector, which handles buy-sell advisory for commercial assets, investment structures and financing, and real estate development.
It is well known that before joining the capital markets institutional sector in 2019, Choi had no track record in buy-sell advisory. Choi earned bachelor's and master's degrees in architectural engineering from Yonsei University and worked at Samsung C&T, Doshiwasaram, and CBRE Korea's asset management department. He then built a real estate investment career at managers including Nomura Real Estate Asset Management, Alpha Asset Management, and Vestas Asset Management. From his first year at CBRE Korea, he put the company at No. 1 in the commercial real estate investment advisory industry and has kept it there.
Choi has built several notable achievements to date. Domestic real assets for which Choi led sales include the Yeouido Shinhan Investment headquarters, Jongno Samil Building, Samsung SDS Tower, Alpharium Tower Buildings 1 and 2, and the Concordian Building. Development assets include the Gayang-dong CJ factory site, the Seongsu-dong Emart headquarters site, and the Magok Emart CP4 zone. The Pangyo Tech One Tower, cited as this year's largest big deal in commercial offices at 2 trillion won, is also a capital markets project he leads. As a result, the organization has tripled in size in six years. The following is a Q&A with Choi.
─Do you feel that the slumping commercial real estate market is recovering?
"To be blunt, judging by transaction volume alone, the mood is improving. This year has been astonishing, with a flood of assets hitting the market at once. We even had to pick and choose mandates to the point of saying, 'We're sorry, but we don't currently have the capacity to prepare a proposal.' Compared with last year, the quantity has definitely increased.
That said, there is something to note. When we pull the year-end data, the Magok district, which saw large new supply this year, will be in there. But in fact, most of the large offices in Magok completed forward-purchase transactions, so strictly speaking, it's hard to see them as transactions between a seller and a buyer. Also this year, there were many cases where constructors assumed the debt of logistics centers they could not sell. These are also recorded as transactions, but to a practitioner, they are not typical transactions. Excluding such cases that are not actual buy-sell deals, I expect growth of about 5% to 10% compared with last year."
─Even so, transactions seem concentrated in certain locations and asset classes.
"That's right. The polarization in which capital selects only strictly prime assets is intensifying. For example, Pangyo Tech One in Seongnam, Gyeonggi, or NC Tower 1 in Samseong-dong, Gangnam-gu, are undeniably good assets. So the question for bidders is how much of the hoped-for price they can bear, not whether the asset will sell. The only concern in selling Tech One was that the price tag was too big, but because the asset was so strong, there was no major problem with financing.
There is also a difference by submarket. GBD (Gangnam Business District) still has solid buying interest. This makes it key how to view CBD (Central Business District) and YBD (Yeouido Business District). YBD basically doesn't have many listings, and the revenue value that sellers want is a bit different from GBD or CBD. It's somewhat like New York—there's no expandability, but demand for apartments and officetels is already in place, so there's no reason for prices to fall. In the long term, it's a structure where prices can only go up. CBD currently has too many assets coming to market at the same time. So picking and focusing is important. Assets that seem 'not that expensive at this level compared with the surroundings' appear to be popular.
Next, price expectations also differ depending on whether it is an asset where value can be further enhanced. If it is an asset where you can take a value-add strategy—transforming it attractively through renovations such as exterior remodeling or expanding parking—you can raise rents, maximize revenue, and then sell. Assets that cannot do so naturally lose popularity in the market."
─What strategy are you taking in this increasingly complex market?
"We pursue the catchphrase, 'We may have clients we have never worked with, but none we work with only once.' I don't think the role of a sell-side lead ends with just selling well. Of course the seller should feel they won, but at the same time the buyer should also feel they benefited, so that both will entrust us with the next transaction.
In other words, rather than obsessing over numbers, if we think from the client's perspective—who will actually buy this asset, what the investor (LP) behind them wants—and provide solutions, transactions can lead to more transactions. My previous experience at asset managers has greatly helped me approach transactions from this perspective."
─Is there a transaction that stands out in your memory?
"I think of the Shinhan Investment building that Shinhan Investment & Securities put up for sale in 2022 for the first time in 28 years. Shinhan Investment & Securities approached all advisory firms as candidates, but we were lacking compared with others in terms of personal networks. So we decided to bet on the PT and proposed a price exceeding 30 million won per pyeong. Until then, and even now, there was no asset in Yeouido exceeding 30 million won per pyeong.
As a rule, we avoid winning mandates by pitching an inflated sale price. But this time, we had grounds to persuade the seller. At the time, Shinhan Investment & Securities needed over 4 trillion won in equity capital to apply for a mega-investment bank (IB) license. Rather than simply raising rents to push up the sale price, we presented concrete, varied value-add measures. Based on these, we were confident we could sufficiently raise the asset's value, and it actually worked."
─What is your commercial real estate investment strategy going forward?
"If you think about which sector is stable to invest in within the real estate market, I still think it is offices. The office market peaked in 2021, turned down the following year, and has been rebounding since 2024. Foreign managers, lacking faith in the growth of the domestic office market, sold many assets around 2022, and it was domestic investors who supported the market then.
In short, Korea did not see work-from-home become as widespread as overseas after the COVID-19 pandemic. That is likely to continue, so I do not think the market will shrink dramatically, like in Singapore. Of course, there could be qualitative polarization and rents could fall so yields decline a bit. But I do not expect a sudden 30% to 40% plunge in asset prices like overseas.
Logistics centers may currently look like they have high vacancy, but both ambient and cold storage logistics centers are seeing vacancies gradually decline, so I think investing now with a three-year horizon is reasonable. This year as well, albeit selectively, logistics centers with good locations and strong specs still traded. There is almost no supply of logistics centers until the year after next. That means in three years, supply and demand will align, and then I think a good market will form again."