M&G Real Estate Acquires Greater Seoul Office Building for $215M 

M&G Real Estate on Thursday announced its purchase of a 97 percent stake in a Greater Seoul office building for KRW 264.5 billion ($214.6 million), marking the UK fund manager’s fourth acquisition in South Korea since 2020 on behalf of an Asian separate account mandate.

Located in Bundang district of Seongnam, a satellite city of Seoul, Bundang M Tower is an eight-storey building measuring 46,125 square feet (4,285 square metres) that is highly favoured by corporates and companies in the IT, biotechnology and gaming sectors, M&G said Thursday in a release.

“Over the past 10 years, the growing office market in Bundang/Pangyo has become the Silicon Valley of South Korea and an alternative to Gangnam,” said Hyesik Ryu, head of Korea at M&G Real Estate. “Opportunities to source assets like M Tower in key submarkets are scarce, underlining the team’s industry knowledge and expertise to source and identify quality assets in the market. M Tower is expected to be a rare Grade A asset in Bundang/Pangyo that is able to meet tenants’ demand for modern, efficient and greener offices.”

The seller of the asset and the holder of the remaining 3 percent interest were not disclosed, but property agency records show that local fund manager Kclavis Asset Management had acquired the 2011-vintage property for KRW 100 billion in the third quarter of 2017.

Tech Hotspot

Situated on Seongnam Street near the Pangyo tech hub, M Tower is about 20 minutes by subway from the upmarket Gangnam Business District and features large floor plates capable of offering expansive spaces to major corporate occupiers.

The purchase price for the fund manager’s stake values the building at roughly KRW 5.9 million ($4,767) per square foot. M&G said leasing is off to a promising start, with major local corporates Naver and Samsung leasing space in the building, as well as European chemical maker Linde.

The London-based firm plans to invest additional capital to upgrade M Tower’s lobby, enhance amenities to include cafes, open communal spaces and meeting rooms, and improve the building’s sustainability credentials, in an effort to reposition its acquisition as a prime office building.

“This is our second investment in Bundang/Pangyo, further enforcing our conviction in South Korea as a global and smart city,” said Teck Leong Kee, a fund manager at M&G Real Estate Asia. “Acquired at an attractive price and with plans underway to upgrade amenities and sustainability credentials, we continue to invest to future-proof our assets for our tenants and to bring value to our investors.”

Last year saw a record office take-up of 12.9 million square feet in Bundang/Pangyo, or about 2.5 times the 10-year average in South Korea, M&G said, citing Savills research. The vacancy rate in Bundang/Pangyo was close to zero amid robust demand from IT tenants.

Space at a Premium

The vacancy rate in Seoul’s broader Grade A office market fell to 4 percent in the first three months of 2022, the lowest level since 2010, with a lack of new supply signalling a landlord’s market for at least the next three years in the South Korean capital, according to a Colliers report released earlier this month.

Several major leases drove down vacancy rates in the Central Business District by 2.5 percentage points to an average of 7 percent in the first quarter, while vacancy in the Gangnam Business District narrowed to a minuscule 0.6 percent, the property services firm said.

First-quarter office rents in the CBD averaged KRW 33,650 per square metre per month, up 0.4 percent from last year’s final quarter, while GBD rents inched up 0.2 percent to KRW 29,985. The Yeouido Business District, which serves as the city’s main financial centre, saw the biggest increase in rents, rising 0.8 percent to KRW 26,125.

With vacancy across the three major submarkets continuing to decrease, Colliers predicts more leasing activity and tenant movement in Pangyo and other emerging business districts like Seongsu-dong, Magok and Gwacheon.