Continuing strong growth of the Far Eastern economies has triggered increased investment demand for office properties in the region's booming cities. The emerging markets that are increasingly attracting the attention of foreign investors, in addition to local fund managers, include Seoul, the capital of South Korea. Hamburg-based DIFA Deutsche Immobilien Fonds AG has now entered the Far Eastern market by investing approximately €62.8 million in Seoul.
After some two years of careful preparation, the company - which is part of the Union Investment Group - purchased the Seoul Mobile Telecom Building in the Mok-Dong office submarket. DIFA plans further acquisitions in Asia Pacific as part of the strategic expansion of its international real estate portfolio, following recent investments in Turkey, Canada and Mexico.
DIFA Management Board member Dr. Reinhard Kutscher: "This investment is evidence of our determination to pursue expansion in the world's growth regions. Entering the South Korean market gives us direct access to the rich opportunities of the emerging Far Eastern markets - markets that offer the prospect of attractive returns." A period of painstaking preparation preceded this first investment, with DIFA's asset management
partner for the region, ING Real Estate, and a team of DIFA experts analysing the market at first hand and prospecting for opportunities. "We expect our strategic partnership with ING Real Estate to ensure the long-term success of our investment in the Far East, which will gradually be expanded to other markets in the region," says Dr. Kutscher. In addition to Seoul and Shanghai, DIFA is preparing to acquire office and retail properties in Singapore and Tokyo.
DIFA opens local office in Singapore
In September 2006, DIFA opened an office in Singapore to spearhead its push into the Far Eastern market. This is the company's third office outside Germany, after New York and Madrid. DIFA will be represented in Singapore by Steffen Wolf, previously responsible for managing DIFA's expansion into the region at headquarters in Hamburg, based on his long experience of the Far East. "Seoul is now among the established Asia Pacific markets with moderate market risk and the prospect of rent increases across all submarkets. But we are also looking very closely at growth markets such as China and India - markets which are less mature, but offer exciting growth potential," says Steffen Wolf with regard to DIFA's future plans. "Singapore provides DIFA with a superb platform for accessing these markets, being both close to the targeted markets and having excellent infrastructure."
Shortage of premium office space in Seoul
The 17-storey Seoul Mobile Telecom Building, which will become part of the international property holdings of the DIFA Immo-Invest fund for institutional investors, enjoys a highly visible, central location in the established office submarket of Mok-Dong. Mok-Dong has emerged as a sought-after overspill location for the neighbouring Yoido office market. Completed in December 1999, the building offers a gross floor area of around 34,000 m², 93 % of which is let. The principal tenants are the online Woori Homeshopping service and Samsung Life Insurance, one of South Korea's largest life insurers. The long-term letting viability of the building is ensured by the limited volume of new building activity and a shortage of premium office space in the area, coupled with high construction quality.