South Korean investors have spent more than $5bn (€3.8bn) on commercial property outside Korea so far this year, a 900% increase on the $500m invested in the first half of 2012.
Jones Lang LaSalle’s Spotlight on South Korean Offshore Investment report also predicts that the total could reach $10bn by the end of the year.
Investment has occurred in all the major global property markets including Europe.
“The steady flow of South Korean institutional capital into European real estate that started in 2009 has increased dramatically. This trend will continue as long as the Koreans can access yields of 6-7% from purchasing core assets in prime locations,” said the head of JLL’s international capital group Europe Matt Richards.
Cross-border investment from South Korea was steady for the past five years. This year’s surge is attributed to large capital inflows into funds and a small domestic market, both of which have encouraged South Korean investors to look abroad, said the report. Recent “uncertainties” in the country’s economic and political landscape – tensions with North Korea and the significant change in Japanese monetary policy – have also added to the attraction of cross-border investment, said JLL.
“The big question over the next five years will be which markets they target,” said JLL’s director of global capital markets research, David Green-Morgan.
There is an increasing preference towards joint ventures in South Korea and institutions will group together to form larger amounts of capital, said the report.
JLL said the result was that South Korean groups investing abroad have specific criteria, typically a net cash yield of 6%-7% with minimal capital expenditure and a holding period of around five years.
