Leading International Property Advisors Seoul Office Market Overview

Transcription

1 Leading International Property Advisors Seoul Office Market Overview November 2011

2 Leasing Market 2

3 Key leasing market themes /2011 Record new supply Highest CBD net absorption in nearly 10 years Vacancy at an all time high 3

4 The current supply cycle has peaked Seoul Prime Office Stock Increase, 2011 Total Stock Total Stock (2006) 5,925,450 sqm 5.2% 2.0% 2.5% 4.7% Total 7,424,850 sqm 7.6% 3,700 3,400 3,100 2,800 2,500 2,200 1,900 1,600 1,300 1,000 Unit: 1,000sqm Euljiro Mirae Asset, Signature +11% State Namsan Tower, YG Tower Source: Savills Korea Total Stock (2010) +2% GT Tower Total Stock (2010) +14% LG Twin Tower One IFC Total Stock (2010) CBD GBD YBD * Source: Savills Korea Research & Consultancy, includes owner-occupied and leased buildings 4

5 Vacancy also appears to have reached its peak 20% Prime Office Market Vacancy Rates, /2002 / % 16% 14% 12% 10% 8% 6% CBD Gangnam Yeouido CBD 18.8% Average 11.6% Gangnam 1.9% Yeouido 13.0% 4% 2% 0% * Source: Savills Korea Research & Consultancy 5

6 Net absorption is almost matching supply Seoul Prime Office Market Net Absorption, /2008 /2011(f) 250 [Unit: 1,000 sqm] CBD GBD YBD +536,000 sqm ,000 sqm ,000 sqm (f) * Source: Savills Korea Research & Consultancy, includes owner-occupied and leased buildings 6

7 Face rent growth is well below inflation Prime Office Market Vacancy Rates, /2002 /2011 No of Bldgs Increasing Rent No of Bldgs Decreasing Rent Average Market YoY Rental Growth(RHS) YoY CPI Growth(RHS) [Unit: 1,000 sqm] % 7% 6% (1) (1) (1) (1) (4) (3) (1) (1) (2) (2) (7) % 4% 3% 2% 1% 0% -1% Source: * Source: Savills Savills Korea Research & Consultancy 7

8 New buildings have added to vacancy Seoul Vacancy Analysis, /2010-/ [Unit: 1,000 sqm] 52 % 6 % 12 % 30 % 47 % 40 % 6 % 14 % 32 % 19 % 7 % 15 % 21 % 16 % 15 % 24 % 11 % 3 % 19 % 10 % * Source: Savills Korea Research & Consultancy New Supply Bldg. Mirae Asset Tower/Pine Avenue Signature Tower One IFC Others State Namsan Kyobo Twin Tree Center 1 8

9 Leasing activity dominated by one big deal New Occupied Area, /2011 Secondary to Enlargement of Prime 9% Existing Tenancy 16% Tenant Area(sqm) From To SK E&C 65,000 Gwanhun-dong Bldg. Mirae Asset Tower Daelim Industrial 54,900 Asia One Twin Tree Hanwha E&C 5,200 Expansion Daelim (Secondary to Prime) 55% New Organisation 17% Prime to Prime 3% GS E&C 2,300 New GFC Allergan 2,200 Metro Bldg. GT Tower Jung-pyung Law Firm 2,000 Secondary GT Tower SBS 1,700 New Kyobo Bldg. a Shinhan Bank 1,600 Expansion MBC 1,600 New Center1 * Source: Savills Korea Research & Consultancy 9

10 2011 Leasing Market Outlook Demand Large relocations for leases already signed up District to district movement due to tenant relocation to One IFC and LG Twin Tower Supply LG Twin Tower remodeling to complete Vacancy Vacancy rates: CBD 16%, GBD 1.7%, YBD 6% ( CBD 18.8%, GBD 1.9%, YBD 13%) 10

11 2012 Leasing Market * Source: Time Magazine, September

12 GDP growth set to decline in 2012 GDP forecast in % 8% 6% 4% 5.5% 4.4% 3.3% 6.3% 8.5% 7.5% 4.4% 4.7% 4.2% 4.9% 3.4% 3.7% 2% 1.0% 3.4% 3.5% 0% -2% -4% -6% % % -3.3% 1H 2H * Source: Statistics Korea, SERI(Samsung Economic Research Institute), LGERI(LG Economic Institute) 12

13 GDP growth leads office demand 18% Korea GDP Growth & Seoul Prime Office Net Absorption, /1998 / Quarter Net Absorption - RHS Axis Annual GDP Growth - LHS Axis Net Absorption Average (1998~2003) Net Absorption Average (2004~2008) Annual GDP Growth Net Absorption (sq.m.) 1,200,000 15% 12% 9% 6% 3% 0% -3% -6% -9% 900, , , , , * Source: Statistics Korea, Savills Korea Research & Consultancy Source: Korea National Statistical Office, Savills Korea 13

14 Supply and vacancy will fall Net Addition and Vacancy Rate, /2008 /2011(F) [Unit: 1,000sqm] CBD New Supply GBD New Supply YBD New Supply CBD Vacancy Rate GBD Vacancy Rate YBD Vacancy Rate 18% 15% 12% 9% 6% 3% 0% -3% Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q E 2012F -6% * Source: Savills Korea Research & Consultancy, includes owner-occupied and leased buildings 14

15 as demand exceeds supply in 2012 Seoul Prime Office Supply, Absorption and Vacancy Rates, (F) Annual Net Additions to Supply Annual Average Vacancy(RHS) Annual Net Absorption Annual Average Vacancy(leased area, RHS) Unit:1,000sqm % 600 8% 400 6% 4% 200 2% E 11 F 12 0% -200 * Source: Savills Korea Research & Consultancy, includes owner-occupied and leased buildings Source: Savills Korea -2% 15

16 2012 Leasing Market Outlook - + Deteriorating economic conditions Less large tenant relocations Completion of corporate HQs 40% Less supply Public companies are looking for space Temporary demand during new construction or renovation 2012 Vacancy rates forecast: CBD 12%, GBD 2%, YBD 12% (Including owner occupied area, CBD 8%, GBD 1.2%, YBD 8%) 16

17 Investment Market 17

18 transaction summary HSBC Building (CBD) Prime Tower (CBD) Samsung Finance Plaza (GBD) Limkwang HQ & Annex (CBD) Date Approx Price KRW bill. KRW bill. KRW bill. KRW bill. Approx Price (mill./3.3 m2 ) KRW 14.1 KRW 16.4 KRW 17.3 KRW 13.3 Cap Rate* 6.5% 5.8% 5.6% 6.3% Vendor RREEF RREEF RREEF Limkwang Purchaser Samsung Private Real Estate No. 3 * Source: Savills Korea Research & Consultancy Samsung Private Real Estate No. 3 Samsung Private Real Estate No. 3 PS KORIF Real Estate Investment Trust No. 2 *Estimated using available information, assuming stabilized tenancy 18

19 More secondary sales are expected in Transaction volumes, /2001-/2011 Unit: 1,000KRW billions Source: Savills Korea * Source: Savills Korea Research & Consultancy 19

20 Where have all the foreigners gone? No. of transactions, /2008-/2011 Foreign Domestic Individuals/Corporations Seller Foreign Domestic Individuals/Corporation Foreign Domestic Individuals/Corporations Purchaser * Source: Savills Korea Research & Consultancy 20

21 Domestic investors are controlling the market Transaction volumes, /2008-/2011 Foreign Domestic Individuals/Corporations 5,000 Foreign Domestic Individuals/Corporation Foreign Domestic Individuals/Corporations 4,500 4,000 1,635 2,320 3,500 3,000 1,018 2,240 1, ,105 1,367 1,097 1,618 1, ,500 2,000 1,500 1, ,015 1,025 2,103 1,027 1, Seller Purchaser * Source: Savills Korea Research & Consultancy 21

22 Core locations are in demand Transaction volumes, /2008-/2011 Prime Secondary Core Secondary Non-core Prime Secondary Core Secondary Non-core , , , , , ,872-1,000 2,000 3,000 4,000 5,000 * Source: Savills Korea Research & Consultancy 22

23 Cost of capital is likely to rise Interest Rate Exchange Rate 9% 1,500 8% 7% 6% 1,400 1,300 5% 4% 3% 2% 1% 1,200 1,100 1,000 1,116 1,100 1,080 1,092 1,073 1,060 0% 1H 2H 900 1H 2H Corporate bond 3-year Treasury Bond 3-year BOK Base Rate * Source: Statistics Korea, SERI(Samsung Economic Research Institute), LGERI(LG Economic Institute) 23

24 2012 Investment Market Outlook Still abundant domestic liquidity With the leasing outlook becoming uncertain and the cost of capital rising, investors are likely to require higher rates of return Long-term investors appetite for prime assets will not be reduced by short-term sentiment fluctuations Domestic investors/ end users still very active 24

25 Thank you! Subject to Contract : This document is prepared by Savills for information only. Whilst reasonable care has been exercised in preparing this document, it is subject to change and these particulars do not constitute, nor constitute part of, an offer or contract; interested parties should not rely on the statements or representations of fact but must satisfy themselves by inspection or otherwise as to the accuracy. No person in the employment of the agent or the agent's principal has any authority to make any representations or warranties whatsoever in relation to these particulars and Savills cannot be held responsible for any liability whatsoever or for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this document. 25