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South Korean investment finds home in Europe

3 MIN READSeptember 19, 2019

2019 has already been a record year of South Korean investment into Europe. With EUR6.2 billion recorded in H1, it has already exceeded the record set in 2018 by 13% - after just 6 months. Something perhaps even more shocking to consider is that South Korean investment has accounted for 10% of all cross border investment into Europe during the first half of this year, up from 3% in 2018. But why is Europe currently so attractive to South Korean capital? 

One of the most well documented factors perhaps is the very publicised US-China trade war. What we’re now seeing is a result of Asian investment looking towards Europe for an alternative source of long term income and lower sovereign risk. Having said this, EUR2.2 billion spent on UK commercial property from South Korea would imply they have remained relatively unwavered in the face of uncertainty that Brexit and populism is bringing to Britain. 

Since regulatory changes in 2015 made it easier for South Korean institutions to invest abroad and ‘deploy new financing channels’, they have become the leading buyers of prime buildings (mainly office) in Europe.  

This year, around two thirds of total Korean investment into Europe has been targeted at Paris. Between January and July of 2019, EUR4.4 billion has been acquired in the city because of its cheap debt and favourable leverage on the euro. Korean investment has remained strong across the continent as the Asian investment strategies favour low risk, consistent capital. 

The necessity for diversification of assets into Europe has favoured the markets with the lowest volatility, which may explain why 88% of this investment has targeted the core office market. 2019 has started to see high profile deals between Korea and CEE real estate players such as Skanska and HB Reavis. Adrian Karczewicz, Skanska’s Head of Divestment in CEE, talked to the GRI Hub about why this is, and what this means for the region: 

‘This Korean capital is seeking out core office, core industrial, long leases, strong tenants, and they can find it in Paris, and they can find it in the CEE... They are certainly the biggest source of investors in our office markets, and this is an incredible story for us because having more investment than just the typical western European inflow legitimises the maturity of our markets. There is also an important aspect of the hedge of the currency, meaning their South Korean won has a great currency hedging premium.’ 

More trends in the commercial space will be discussed by leading real estate players at GRI Offices, which takes place on the 19-20 November in London.

Article by Matt Harris

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