Two years into the COVID-19 pandemic, South Korean investors remain a stalwart among foreign-capital sources as they continue to increase the amount of money being invested in the U.S. commercial real estate market. Last year, however, saw a major slowdown in the expansion of investments coming from the East Asian economic dynamo.
Focusing much of their firepower on America’s beleaguered office sector, South Korean investors accounted for $5.83 billion in direct acquisition volume in the U.S. in 2021, according to data from Real Capital Analytics (RCA). While this total was an increase of 5% from 2020, South Korea fell to No. 3 among overseas investment sources after reaching second place in 2020. The difference maker was Singapore, which ranked second behind Canada after flooding back into the U.S. market last year by acquiring $15.7 billion worth of U.S properties, more than five times the amount the island nation had acquired in 2020, according to RCA.
South Korea’s investors appeared to focus on finding deals in the struggling U.S. office-space sector, mainly in the central business districts (CBDs) of major cities. Of RCA’s list of the top 10 buyers of office real estate in U.S. downtowns, five were from South Korea. The nation’s investors were on only one other RCA top 10 list by property type: The JR AMC Co. placed No. 9 among buyers of suburban office space.
Several South Korean companies are so interested in U.S. investments that they have created agreements with other real estate developers and have even opened North American offices. For example, Mastern Investment Management, a Seoul-based real estate investment firm, opened a subsidiary (Mastern American) in New York City in March 2021.
It’s little surprise that South Korea’s National Pension Service (NPS) continues to be one of the nation’s leaders in real estate. According to RCA, NPS invested $800 million in U.S. CBD office space last year. The biggest news, however, may involve NPS creating a series of agreements that will keep the pension fund investing in U.S. commercial real estate for some time to come.
In November 2021, NPS announced that it was teaming up with U.S. developer Tishman Speyer to create a $1.5 billion separately managed account for investments in real estate innovation and high-demand asset classes across major U.S. markets. The agreement is only the latest move by the two companies, which have been long-time investment partners.
Tishman also has a $500 million fund with South Korea’s Hana Financial Group. This fund, however, is not solely tied to the U.S. and also will invest in real estate projects in Europe and Asia.
Hana was quite busy in 2021, making CBD office deals worth about $647 million, according to RCA. The total does not include a December 2020 deal in which Hana spent $670 million to acquire the 38-story 2+U office and retail tower in downtown Seattle. Hana kept its buying spree going a month later, spending $201 million on a 15-story, 358,000-square-foot office building in Charlotte.
A third company, the Meritz Financial Group, spent a total of about $776 million in U.S. commercial real estate last year, including $387 million for a 49% stake in the Daily News Building in New York City. With at least one new division in the U.S. and a series of joint ventures, it appears that South Korean commercial real estate investors will remain bullish within the states. ●