Nuveen sees growing institutional opportunity in Korea's rental housing

Global asset manager Nuveen sees Korea's housing market becoming increasingly accessible to institutional capital as the country's traditional lump-sum deposit system gradually gives way to monthly rents.

"It's becoming more of an institutional market ... more akin to what you see in the U.S., with monthly rental payments," Chad Phillips, global head of Nuveen Real Estate, said at a press conference at Conrad Seoul on Friday. "We've recently invested in a residential asset here in Seoul, which will open early next year."

In May, Nuveen acquired a property near Dongdaemun History & Culture Park Station in Seoul for about 22.5 billion won ($16.72 million). In partnership with Korean startup Weave Living, the property is being converted into a 62-unit serviced apartment, scheduled to open in January.

The investment marks Nuveen's first move into Korea's residential sector. Nuveen first entered Korea's real estate market in 2019 through a logistics investment in Namyangju, Gyeonggi Province, and later expanded into logistics facilities in Uiwang and Ilsan.

The asset manager remains positive on Seoul offices and the living sector.

This view partly reflects Korea's relative resilience. While global real estate values are down roughly 15 to 25 percent from their mid-2022 peak, Korea has largely avoided the steep repricing seen overseas, according to Nuveen.

In the U.S. and Europe, the rise of remote work triggered a sharp decline in demand for office space and weighed heavily on property values. Korea experienced a less pronounced shift, helping Seoul's office market remain strong.

Nuveen also sees improving prospects across Asia-Pacific, supported by the region's role as a major manufacturing hub for technology-related products.

Going forward, Nuveen views a higher-for-longer interest rate environment as one of the key factors influencing investment decisions. Persistent inflation has prompted central banks to maintain a hawkish stance, while yields on 10-year government bonds in major markets are moving higher.

Even so, the firm believes the latest rise in yields has been modest compared with previous rate shocks and that much of the impact of higher financing costs has already been incorporated into real estate prices.

Signs of recovery are also beginning to emerge. Property valuations have started to rebound in some markets, particularly in Europe, while global private real estate has generated positive total returns for eight consecutive quarters, according to Nuveen.

For Korean investors, more attractive opportunities may lie overseas, as sharper corrections have pushed some asset values further below replacement costs, said Abigail Dean, global head of strategic insights for Nuveen Real Assets.

Nuveen is the global asset management arm of TIAA, the U.S. retirement services organization serving teachers and other professionals. The firm manages about $1.4 trillion across public and private markets and opened its Seoul office in March 2021.