Large office buildings in downtown Seoul are returning into Korean hands. In the wake of the 1997 Asian financial crisis, several Korean companies sold big office buildings to overseas companies at knockdown prices to secure liquidity, but now they are aggressively trying to get them back.
The prices of office buildings are skyrocketing despite the recession because asset management companies and conglomerates have jumped into the competition. The overseas owners, meanwhile, are selling to make a profit and secure liquidity.
The ING Tower in southern Seoul was priced at W17 million (US$1=W1,256) per 3.3 sq.m in late March but sold for W400 billion in fierce competition among five or six Korean companies and investment funds. The Dacom building, previously priced at W15 million per 3.3 sq.m, was asked for W18.3-18.5 million per 3.3 sq.m when 22 companies participated in a preliminary bid alone.
Yet there are concerns that Korean investors' current craze for office buildings could lead to an asset bubble. "With the recent sharp decline in interest rates, funds are flowing into the commercial property market so as not to miss an opportunity in the asset boom, but if higher purchase prices give rise to higher rent, this could aggravate the recent increase in vacancies," said an executive of a foreign real estate investment company.