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Jones Lang LaSalle report shows unprecedented growth for South Korean cross-border real estate investment
CHICAGO, June 26, 2013 — A new day has dawned for South Korea as investors look beyond borders for commercial real estate investment opportunities, pouring an unprecedented amount of capital into international properties in the first quarter of the year. The surge is so strong that the investments topped $5 billion in cross-border purchases since the beginning of 2013, according to a report released today by Jones Lang LaSalle’s International Capital Group. Findings in “The Spotlight on South Korean Offshore Investment” show an exponential 900 percent increase from the $500 million transacted in the first half of 2012.
“The gates are wide open; in fact, the gates have been blown off their hinges as South Korean investors look far and wide for transparent, yield-producing properties to seed capital. For the past five years, they’ve dipped their toes in the water, looking at major markets like New York, San Francisco, Washington, D.C. and Chicago, to become more comfortable with the process. Now, they’re diving into the deep end. Watch for this trend to continue full strength in the months ahead,” said Steve Collins, International Director with Jones Lang LaSalle’s Capital Markets.
The report demonstrates growth in offshore investment, which Jones Lang LaSalle predicts could reach $10 billion by the end of the year. Not concentrated or confined within one particular region or sector, transactions will extend across all the major property markets worldwide, from shopping centers in Australia to an office tower in Chicago’s central business district.
Matt Richards, Head of Jones Lang LaSalle’s International Capital Group, Europe, commented, "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 they can access yields of six to seven percent from purchasing core assets in prime locations.”
Cross-border investment from South Korea has remained relatively consistent over the past five years, and this surge in 2013 is due to large capital inflows into funds and a small domestic market, both of which have encouraged South Korean investors to seek opportunities outside their home market. Recent uncertainties in the country’s economic and political landscape have also added to the attraction of cross-border investment, as tensions with North Korea and the significant change in Japanese monetary policy contribute to ‘capital flight’.
David Green-Morgan, Director, Global Capital Markets Research at Jones Lang LaSalle, said, “We saw unprecedented activity on the global stage in the first half of 2013, as an increased number of institutional investors looked to international markets seeking higher yields. While such a sharp increase in this timeframe is unusual, we don’t foresee the trend slowing down as local market conditions will continue to make international acquisitions an attractive option for South Korean investors. The big question over the next five years will be which markets they target.”
As South Korean activity in the first quarter of 2013 surpassed that of traditional cross-border investors, such as Canada, Singapore and Norway, it points to a shift in the nature of international investment with an increasing preference towards joint ventures. This is particularly common in South Korea where, typically, institutions will collectively invest larger amounts of capital that are then managed by one asset manager.
As a result, South Korean groups that invest outside their home market look for specific criteria from any potential acquisition in order to ensure it fulfills their distribution commitments. Typical requirements such as a net cash yield of between six and seven percent with minimal capital expenditure and a holding period of around five years will influence the destination markets for South Korean investment throughout the remainder of 2013 and beyond.
Jones Lang LaSalle Capital Markets is a full-service global provider of capital solutions for real estate investors and occupiers. The firm’s in-depth local market and global investor knowledge delivers the best-in-class solutions for clients — whether a sale, financing, repositioning, advisory or recapitalization execution. In 2012 alone, Jones Lang LaSalle’s Capital Markets completed $63 billion in investment sale and debt and equity transactions globally. The firm’s dealmakers completed $60 billion in global investment sales and buy-side transactions, equating to nearly $240 million of investment trades completed every working day around the globe. The firm’s Capital Markets team comprises more than 1,300 specialists, operating all over the globe.
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About Jones Lang LaSalleJones Lang LaSalle (NYSE:JLL) is a professional services and investment management firm offering specialized real estate services to clients seeking increased value by owning, occupying and investing in real estate. With annual revenue of $3.9 billion, Jones Lang LaSalle operates in 70 countries from more than 1,000 locations worldwide. On behalf of its clients, the firm provides management and real estate outsourcing services to a property portfolio of 2.6 billion square feet and completed $63 billion in sales, acquisitions and finance transactions in 2012. Its investment management business, LaSalle Investment Management, has $47.7 billion of real estate assets under management. For further information, visit www.jll.com.
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