Park Jae-hyuk is a seasoned journalist who has provided comprehensive coverage of South Korea's corporate dynamics, economic policies, industry challenges and the global positioning of Korean companies. Based on the articles he has written since joining The Korea Times in 2016, his investigative approach has helped readers understand corporate governance, economic trends and business strategies shaping South Korea’s economy.
INTERVIEW COVID-19 could benefit Korean office market
Cushman & Wakefield Korea Managing Director Richard Hwang poses before an interview at his office in Seoul, July 13. / Korea Times photo by Choi Won-suk
By Park Jae-hyuk
C&W Korea head says GIC, KKR seek more investments here
By Park Jae-hyuk
The ongoing spread of the COVID-19 pandemic has aroused concerns over investments in commercial real estate properties, as it has been difficult for foreign investors to conduct on-site due diligence because of worldwide travel restrictions.
The world's largest work-from-home experiment, which has been quite successful, has also caused worries about a decrease in global office demand.
Cushman & Wakefield (C&W) Korea Managing Director Richard Hwang, however, dismissed the concerns, saying COVID-19 could be a new opportunity for the office market, especially in Korea which has been recognized for its response to the pandemic.
The real estate expert, who has led the U.S. commercial real estate services firm's local subsidiary since 2009, noted foreign institutional investors still seek aggressive investments here.
Although he admitted the size of deals his company was involved in during the first half dropped 20 percent to 4.7 trillion won ($3.9 billion) from 6 trillion won a year earlier. This was because many projects were stopped or delayed between March and April, he refuted claims that this trend would continue.
“Our perspective is bit different from market outsiders',” he told The Korea Times in a recent interview at his Seoul office.
“It could be partially correct to say that conducting on-site due diligence has been difficult, but this is inapplicable to most foreign investors here, such as GIC, KKR and Actis, which already localized a few years ago through their operations in Korea.”
According to the managing director, GIC has shown interest in spaces for company head offices and super-size logistics centers here; while KKR has focused more on skyscrapers.
Actis presumably earned 280 billion won in profit from its recent sale of the Young City office complex building in Yeongdeungpo, southwestern Seoul, in which C&W Korea participated as the sales agent.
“After a successful containment of the virus, Korea has been able to take an advantageous position,” he said. “More global retailers have emerged that seek to open additional outlets only in Korea.”
As the head of the company that served as the adviser to Blue Bottle Coffee when the U.S. specialty coffee brand tapped the Korean market, Hwang said a growing number of global brands are regarding the country as a test market for all of Asia.
With this optimistic outlook, he forecast telecommuting will not reduce global office demand, because wider personal spaces have become the new normal for social distancing.
“The number of people working at their offices might go down, but the size of the working spaces will not be reduced,” he said.
The managing director mentioned the government's attempt to impose more taxes on housing transactions as another favorable factor for the domestic commercial real estate market.
“If the interest rate remains low, many investors will shift their focus from houses to commercial real estate or REITs,” he said.
“The volatile stock market is attractive enough to retail investors at this moment, but if the stock market becomes stable, individuals will transfer their money to the commercial real estate market.”
Impact of Hong Kong unrest
But his opinion may face the criticism that the nation's commercial real estate market has suffered increasing vacancy rates over the past few years.
A rumor that WeWork is considering pulling out of Korea could be another unfavorable factor.
Hwang admitted this, but he emphasized it does not necessarily mean an outflow of capital from the Korean office market to Singapore, Hong Kong and China, all of which are regarded as alternatives to Korea.
“The volatility of the Korean office market is much lower than those of Singapore and Hong Kong,” he said. “Because dismissal is easier in financial hubs, prices in the office market fluctuate more wildly there.”
According to his company, Hong Kong is even facing the worst vacancy rates recently, because more multinational firms have scaled back their operations following COVID-19 and the introduction of the national security law by Beijing.
C&W said the city's vacancy rate has hit the highest in 15 years, as the rate of companies surrendering their office spaces jumped 55 percent in the second quarter from the first, to 577,000 square feet. In particular, foreign companies made up 61 percent of those surrendering office space in the second quarter, up from 47 percent in the previous quarter.
Hwang expected these factors will prompt Hong Kong's rich people and developers to pay attention to outside the city, including Korea, which could lead to a capital inflow into the Korean office market.
However, he made it clear that the concentration of money does not always coincide with becoming an international financial hub.
“It is difficult to expect Korea to become a financial hub in a short period of time,” he said. “Not only does the country confront North Korea, it lacks a workforce that is good at English, and tax incentives.”