Executive sees fertile ground for real estate services
“Currently, large amount of money globally is piling up in pensions and funds,” Hwang said in a recent interview with the Korea JoongAng Daily at the company’s office in Sogong-dong, central Seoul. “With the tapering of quantitative easing by the Fed, investors will feel uncertain financially and turn to more stable investments like real estate.”
This would boost business opportunities for companies like Cushman & Wakefield, a global real estate solutions provider based in New York. The company was established in 1917 and has 253 offices in 60 countries. There are two offices in Korea - in Seoul and Busan.
Since the establishment of the Seoul office in 2000, Cushman & Wakefield Korea has been offering real estate consulting services to nultinational companies wishing to invest in Korea and Korean companies overseas. Hwang, the managing director, has been at the forefront of the company’s Korea operations based on his 15 years of experience in retail property management.
Q. Not many people know about Cushman & Wakefield in Korea. Can you tell us about some of the real estate consulting services you offer?
A.Although the services we offer here have been somewhat localized to meet the needs of Korean clients, Cushman & Wakefield is a global firm and it is our principle that we provide all of our global services in each country we operate in, including Korea. Broadly, we provide [real estate] solutions to global tenants in the retail and office sectors by offering consulting services and giving them advice. In addition, we offer asset management services and manage clients’ profit, projects and facilities. There’s also capital market services, which include managing clients’ building purchases and sales. [Cushman & Wakefield is engaged in four areas globally: transaction services, capital markets, client solutions and consulting.] In Korea in particular, we offer strong transaction services, such as with rental contracts. In the past two years, we also have focused on property management. Our main competitors globally are Jones Lang LaSalle and CB Richard Ellis in terms of global sales, service coverage and number of clients. The two companies also operate here in Korea, and every day is a competition for us.
The size of the Korean economy in terms of trade volume is among the top 10 globally. But in terms of real estate market services, it is still behind other countries. For example, for companies like us and Jones Lang LaSalle, 40 percent of Asia Pacific sales come from Australia. The population of Australia however is only 20 million. This means that there are many services being offered by real estate service providers. As for Korea, it has a population of almost 50 million, but sales of global consulting firms like us are still very low. At the same time, this means there’s potential and opportunity in expanding real estate services. Although companies like Samsung Electronics and LG are expanding their businesses to global markets, they have no centralized real estate team that manages their growing assets. This is in contrast to global companies like IBM and Thomson Reuters that have service providers or a centralized real estate service team that takes care of even little things like when expanding an office by 30 to 40 pyong. The difference between having such service and not shows that in Korea, companies think of real estate investment and management as a subordinate part of their businesses.
The Korean unit of Cushman & Wakefield was set up in 2000. You also joined the company that year. What changes have you witnessed in the Korean commercial real estate industry?
In 2000, many foreign consulting firms entered the Korean market. We need to see why many of them came here. We know there was the Asian financial crisis in 1998 and in the following year, the value of the won weakened and asset values plunged. The overall environment was favorable for foreign investors to come to Korea and invest. Another big change in the industry overall came following the collapse of Lehman Brothers. The exchange rate was quite high then and companies that entered were those like Morgan Stanley. They were optimistic investors seeking high risk and high return. The [commercial real estate] market stabilized a bit after that and foreign funds flew into Korea for yield plays. It was in 2005 and 2006 that local players emerged like Mirae Asset [that engaged in commercial real estate investment].
Some experts see an oversupply of stores and facilities in commercial districts of Seoul. Do you agree?
Overall, I would agree. But what’s important to note is that most of the commercial areas in the Seoul metropolitan areas have been developed without studying the actual commercial needs in the area. When a multipurpose building is built, by law, 30 percent of the area has to be commercial facilities. So, for example, if a 10,000 pyong multipurpose building is built, 3,000 pyong must be commercial space. This is why there seems to be an oversupply of commercial facilities in the capital area.
What area in Seoul or region in Korea would you recommend to investors or multinational companies interested in expanding their real estate assets?
The central area. It’s necessary to invest core assets in core regions. When [Korean companies] invest overseas, it is mainly in Manhattan, London or Hong Kong’s Causeway Bay. When foreign companies invest in Korea, they mostly invest in core office areas like Myeong-dong and Gangnam. The reason why they do that is when [real estate prices] go up they go up slowly, but the investment volume is big and [the price] hardly never falls. I believe more money from overseas investors will be aggressively invested in stable assets in Korea and in long-term on core markets. I tell my friends that even if the investment is small, they should invest in the core area.
There are two different concepts in real estate. There are people who do business utilizing real estate to gain capital, and there are others who want stable profits by owning restaurants. There is high risk for people who open stores in Myeong-dong and Gangnam, because most of the brands that open stores in those areas are for marketing purposes. Most of them are flagship stores. Individual store owners would not be able to afford rent fees after three or four years because they will get higher.
Personally, how do you manage your own financial assets? Do you invest a lot in real estate funds? What advice would you like to give others investing in real estate?
You need a lot of money to invest in real estate. The investment cost is really high when you want to invest in core commercial areas. In Korea, there is an old saying that you should never have a financial relationship with your friends and family, but I think there should be some creative thinking to that. A real estate fund, for example, is run based on trust. Investors give money trusting the fund manager based on a set system. But it is often the case that most people in Korea, rather than utilizing that system, wish to invest 100 percent on their own. They won’t be able to invest in commercial areas on their own unless they earn 3 billion won to 4 billion won. This is why the number of people investing in real estate tends to be limited. As for me, I have invested in several items together with my friends by collecting money. There should be a change in the belief that real estate investment should be done alone.
A CEO’s CV
1988-94: Bachelor of urban planning, Hanyang University
1996~2000: Employee of new development team, LG Department Store (now Lotte Department Store)
2000: Joins Cushman & Wakefield Korea
2007~09: Senior director, Cushman & Wakefield Korea
2009 to present: Managing director, Cushman & Wakefield Korea
BY LEE EUN-JOO [email@example.com]