South Korean investors see opportunity in US commercial real estate

Investors from South Korea are turning to the U.S. real estate market as a financial safe haven.

In the first half of 2013 alone, South Korean investors have spent $5.4 billion on property outside their home market, according to real estate services firm John Lang LaSalle, more than double what was spent the previous year. Almost half of that money is finding its way into the U.S. market, giving a substantial boost to domestic sales.   

Korean investors look to U.S. for stability
With governments and markets around the world experiencing significant upheaval over the past few years, the U.S. is once again being viewed as a safe harbor for foreign investment. Many investors in South Korea, the world's sixth largest economy, have been looking to diversify their portfolios, and American commercial real estate has been one of the primary avenues they have chosen to pursue that effort. It also provides a hedge against political turmoil on the Korean peninsula.

"There's a mix of reasons, but with the whole blowup between North and South Korea…they started to put their money down," said Steve Collins, international director with JLL.

Commercial real estate companies in the U.S. are benefiting as purchases of both large and small properties are on the rise, bringing large amounts of foreign investment money into the coffers of those companies. The mixed-use Washington Harbour property in the Georgetown neighborhood of Washington D.C. last month, bought by a group of Korean investors for $317 million, and a Chicago office tower that was purchased for $217 million by Mirae Asset Global Investments Co., a South Korean financial services firm, were a few acquisitions that made headlines.

Korean investment likely to spread across the country
South Korea's sovereign investment fund, Korea Investment Corp., plans to spend $10 billion by 2016 in an effort to diversify its portfolio, and real estate is one of the major areas where they are looking to expand their business. Lee Dong Ik, the fund's chief investment officer, indicated that real estate was likely to make up approximately 30 percent of their investment strategy. 

Mr. Lee also voiced his belief that certain prime markets in the U.S. and around the world – namely New York City and London – were overpriced. As a result, the fund will spread its investment around a diverse set of regions, taking advantage of secondary and tertiary markets, in order to avoid overpaying for properties.

With foreign investment in the U.S. real estate market on the rise, commercial real estate brokers have an even greater resource to tap into when looking to sell properties.

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