Why Hasn't Korean Capital Invested in European Real Estate Yet? [Kim Yongnam's Real Estate Asset Management]

A look at the global real estate market leads to one question. While Korean investors have actively allocated capital to the U.S., Japan, and more recently, the Middle East, their participation in the European real estate market has remained relatively limited. This is less a result of a lack of investment opportunities and more a consequence of structural barriers to entry. However, with the recent expansion of logistics investment and the emergence of AI real estate platforms, the global investment landscape is rapidly being reshaped, and this question is now beginning to take on a different meaning.

Over the past decade, the flow of overseas real estate investment has been relatively clear. In the 2010s, office assets centered in New York and San Francisco were the core investment destinations. Subsequently, Japan established itself as a stable income-generating market amidst a macroeconomic environment of ultra-low interest rates and a weak yen. More recently, the Dubai market has emerged as a new investment axis, based on tax benefits and residency programs. Ultimately, capital has moved to markets where information accessibility and networks are secured.

On the other hand, Europe has a completely different structure. It is not a single market but a combination of multiple countries, where the tax systems, regulations, and legal frameworks of each nation operate differently. This increases the complexity of the information required for investment decisions and, at the same time, is a factor that allows a network-based, closed transaction structure to remain strong. Consequently, it has acted as a high barrier to entry for outside investors.

However, changes that are shaking these barriers are now appearing simultaneously in the European market. First is the emergence of AI-based real estate investment platforms. AI real estate platforms like the Estonia-based Consorto are resolving information asymmetry, connecting investment opportunities with capital, and transforming the existing closed market structure into a more open one. It is particularly significant in that it has increased access to deals, which were close to a private market, and maximized the efficiency of the investment review process, thereby enhancing both the speed and accuracy of decision-making. Recently, global family offices that manage long-term capital have been expanding direct investments in European logistics and core assets using such platforms, and with the possibility of co-investment structures ranging from 5 million to 20 million euros, the flexibility of investment units has also greatly increased.

Second is the investment timing created by price adjustments. The European real estate market has undergone a valuation realignment, with some asset prices adjusting by about -10% to -25% due to the impact of interest rate hikes from 2022 to 2024. This can be seen not as a simple decline but as a process of market structure realignment, and the biggest investment opportunities in the real estate market cycle often appear in the early recovery phase after such adjustments.

Third is the structural demand change brought about by the reorganization of the global supply chain. The expansion of e-commerce and the shift of manufacturing bases are significantly elevating the strategic importance of European logistics infrastructure. In particular, Central and Eastern European (CEE) countries such as Poland, the Czech Republic, and Hungary are emerging as key logistics hubs in Europe based on their competitive cost structures and growth potential, with some logistics assets generating stable returns of 6% to 8% per year.

Of course, behind these opportunities, there are still variables that need to be considered. Differences in regulations by country, exchange rate fluctuations, and the ability to secure local operational capabilities are key factors that determine investment performance. Therefore, when entering the European market, a strategic approach that combines the establishment of a local network and real estate asset management capabilities is necessary, going beyond simple asset acquisition.

Ultimately, the flow of global capital is being reshaped in a new direction. Overseas real estate investment is evolving beyond a strategy of concentrating on specific countries to a stage of selecting diversification among markets and structural growth axes, and Europe is no longer an unfamiliar market but is establishing itself as an investment target that should be fully considered in a portfolio.

<Korea Economic The Moneyist> Kim Yongnam, CEO and President of GlobalPMC Co., Ltd.