Spotlight on Seoul: Despite Recent Economic Hardship, Korean Real Estate Takes a Great Leap Forward
Moon, Harrison, Journal of Property Management
In the wake of South Korea's 1997 financial crisis, a new economy has emerged that is attracting both property managers and investors. The country re-paid a $19.5 billion debt to the International Monetary Fund (IMF) in 2002, signaling the end of five years of financial difficulties along with a new-found capability to re-develop its economy. Concurrently, certain sustained beliefs about the country's real estate market were broken and new principles began to define it.
Korea's real estate market has grown and progressed rapidly based on these changes. Before the financial crisis, the capital market in the real estate industry essentially did not exist in Korea because commercial real estate operated within a narrow scope. New definitions and calculations of real estate valuation were introduced during the IMF crisis. Many properties, including the headquarters of local companies, were up for sale at half of their original price and most landlords paid debts by disposing of real estate assets.
During this time, foreign investors obtained devalued Korean stocks and real estate properties. The government encouraged these investors and released many restrictions to stimulate the new market. The size of the Korean real estate market subsequently grew, as did various complementary fields such as leasing, property management and brokerage.
Just four years ago, the concept of property management was absent in Korea.
The commercial real estate property management business was first introduced by CB Richard Ellis in 1999, which was followed by several international property management firms including Jones Lang LaSalle and Cushman & Wakefield. These companies provide a professional service to investors rushing into Korea. Even America's Lone Star fund founded its own property management company, Star PMC. …