What determines the demand of real estate investors in the United States, and not in Europe
After the pandemic, investors’ interest in different regions has changed. While before the crisis the number of investments in the European market by Koreans increased every year, now the trends are opposite. Experts note that the demand of investors from this country has shifted towards the USA and Asia.
In 2019 the Koreans invested 12.5 billion dollars in the European real estate market, and in the first half of 2020 the volume fell to 2.2 billion dollars.
The decline in the number of Korean businessmen is due to another peculiarity. European buyers are focused on rather low target yield from the point of view of Koreans. Therefore, they acquire assets on terms attractive to sellers. In this case, it becomes difficult to get an advantageous price.
The rate of return in the segment of commercial real estate in European countries fell to 4%, although a year ago it was at 6.5%. This situation alerts investors from Korea, for example, Igis Asset Management has previously invested about 7 billion euros in the region’s market, but is not planning further acquisitions here by the end of the year. At the same time, it intends to invest 3 billion dollars in real estate in the U.S., and already owns assets here for $900 million. The Koreans are first of all interested in logistics facilities.
The USA offers favorable interest rates and an interesting offer. For comparison, in the U.S. interest rates fell by 1.5% in March last year, at the height of the pandemic. Now they are 0.25 percent, with zero rates introduced in Europe back in 2015.
Korean company Igis Asset Management believes that the high cost of American real estate is quite justified by its profitability. The investor is focused on investments into logistics centers that are rented by e-commerce companies. The firm plans to change the distribution of assets in its portfolio. Now the distribution of investments between the USA and Europe is 30/70, and in the future it should become 40/60.
Experts note that in the last quarter the number of deals in the European market by Korean businessmen has significantly decreased. The volume of investments into Asia and the USA has increased. However, market analysts say that the decline of Korean companies’ activity in Europe is a temporary phenomenon and their interest will soon resume. In addition, investors from other Asian countries continue to actively invest in this market. For example, companies from Malaysia are acquiring assets in the UK and are planning to invest in other countries of the region.
