Cushman & Wakefield, market forecast for next year
“Considering relocation of some companies to outlying areas due to economic recession”
Logistics center oversupply… “Rent is at this year’s level”
There are predictions that next year’s commercial real estate market will see rents rise further as a market dominated by landlords is formed due to a lack of new supply in major areas. The distribution center market is expected to continue to be dominated by tenants due to oversupply.
Cushman & Wakefield Korea said in its ‘2025 Real Estate Market Forecast Report’ on the 22nd, “The office transaction market was stagnant due to high interest rates in the second half of 2022, but has entered a recovery trend with a 4% cap rate this year.” “Next year, SI and asset He predicted that transactions in Grade A or higher offices and medium-sized or larger headquarters buildings, including securitization transactions and investments for value addition, will continue.”
Analysis showed that new supply in major business areas is insufficient compared to the increase in demand. Restrictions on new supply will continue until 2025, and it is expected that office supply in major areas will take a breather through the redevelopment of the office district (CBD) in Jongno and Gwanghwamun in 2026.
It was also predicted that rental demand in Yeouido (YBD) and Gangnam area (GBD) will increase further as the number of workers is expected to increase next year. In particular, the Gangnam area is a preferred area for IT and startups, and the preference is expected to continue for the time being due to high demand from various industries such as finance, retail, service, and manufacturing.
As demand for offices in major areas of Seoul increases and new supply is limited, there is a high possibility that this will lead to an increase in rents. With the completion of a large-scale office in Magok this year, it is expected that some companies, including large corporations, may relocate to other areas.
In fact, it was recently reported that DL Group is considering relocating to other areas, such as Magok. HDC Hyundai Development Company plans to leave Yongsan and relocate along with the development of the area near Kwangwoon University Station in Nowon-gu.
Cushman & Wakefield said, “As companies are being observed to consider downgrading or relocating due to the economic downturn and worsening business environment, there is a possibility of a slight increase in vacancies in some areas,” adding, “Due to rising prices and limited supply, rents will continue to rise until next year.” It is expected to continue to rise. In particular, he predicted that GBD rents will continue to remain at a high level.
On the other hand, the distribution center market is expected to remain dominated by tenants next year as there is an oversupply during the COVID-19 pandemic.
Kim Soo-kyung, head of the Cushman & Wakefield research team, said, “Due to the oversupply of logistics centers, the balance between supply and demand for room temperature logistics centers is expected to be in 2028, and it is expected that supply and demand for low temperature logistics centers will be in balance in 2030.” “There is a possibility that the period may be brought forward due to the active participation of large shippers, etc., but it will take a considerable amount of time to resolve the oversupply at low-temperature logistics centers.”
Rents are expected to stagnate or fall due to oversupply. The average vacancy rate for logistics centers in the metropolitan area was 18%, and the eastern region had the lowest vacancy rate at 14%.
Team Leader Kim said, “Logistics demand will continue to increase due to the growth of e-commerce and increase in delivery volume, but the rate of demand growth will moderate somewhat,” and predicted, “As the tenant-dominant market continues for the time being, rents in 2025 will remain at the current level.” .
However, there is a possibility that macroeconomic factors may act as variables. When the Trump administration takes office in the United States, trade conflicts between China and the imposition of universal tariffs are expected to affect the semiconductor industry and electric vehicle exports. In a situation of increased political uncertainty such as martial law and impeachment, base interest rate cuts, economic growth rates, and inflation rates are also likely to affect commercial real estate.
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