Multitenant assets to improve Korean property investors’ resilience: analysis

South Korean investors’ focus could be on multitenant commercial properties as they have greater room for improvement than single-tenant properties under their traditional low-risk strategy amid prospects for post-pandemic uncertainties, a research paper showed Monday.

Such assets can help Korean outbound investors seek extra income from investment and stay resilient from economic uncertainties that arise from a projected interest rate hike across the world in the wake of the pandemic recovery, according to research by Seoul-based real estate investment manager Mastern Investment Management.

Commercial real assets with multiple tenants, those that have less stable tenant base with short weighted average lease expiration and those that are rented at a lower cost in key business districts could be alternative types of assets that Korean investors can buy for portfolio rebalancing.

These assets can help Korean investors enjoy “an increase in net operating income in light of the inflation,” noted Ji Hyo-jin, who leads a research team at Mastern, adding these types of assets have larger room for improvement in valuation, by replacing existing tenants with those with better spending capacity.

“The heightening market volatility due to COVID-19 raises a need for a portfolio rebalancing to address the asset price volatility during the phase of economic recovery,” wrote Ji.

Korean outbound property investors have been sensitive to trends and tended to ride on a bandwagon of one another. Once showing a penchant for single-tenant buildings in pursuit of stable capital gains, they have begun turning their attention to Amazon-leased logistics assets in the wake of the pandemic.

According to Mastern’s estimate, 47 percent of new property investments had gone to Amazon-leased distribution centers from the beginning of the COVID-19 outbreak until July this year.

From 2020 through July, Korean investors deployed $12.9 billion in capital, according to Mastern. The volume has shrunk compared with that of 2019, at $18.8 billion.

Mastern had 25.3 trillion won ($21.4 billion) in assets under management, with its portfolio comprising 140 real assets.

By Son Ji-hyoung (consnow@heraldcorp.com)