[Edaily Marketin YunJi Kim Reporter] "The South Korean rental housing market is now shifting toward institutional capital."

Mike Sales, CEO of Nubin Real Asset, shared this assessment of the South Korean rental housing market in a recent interview with Edaily. Sales, who also visited South Korea last year, predicted at the time that the shift from jeonse (lump-sum deposit leases) to monthly rent would spur institutional investors to enter the rental housing market. Now, one year later, that forecast is becoming a reality. As global asset managers expand their investment scope beyond logistics and data centers into the “living” sector—including rental housing—the inflow of institutional capital appears to be gaining momentum.

Annual Returns of 7–10% Possible… The Key Is Scale

Nubin Real Asset is the real asset investment division of global asset manager Nubin, investing in various real assets such as real estate and infrastructure. In South Korea, starting with a logistics center in Namyangju in 2019, the firm has acquired logistics assets in Uiwang and Ilsan, and in 2024, it acquired the Jeongdong Building in Seoul for approximately 350 billion won. This year, it partnered with WeeVee Living to develop a 62-unit rental housing project in Jung-gu, Seoul, marking its first investment in the living sector in the country.

CEO Sales believes that even considering current asset prices and rental rates in Seoul, the firm can still achieve the rates of return expected by institutional investors. He explained that for “Core” investments—which seek stable rental income—an annual return of 7–10% can be expected. However, he added that for “Value-Add” strategies, which aim to boost returns through development or large-scale remodeling, investors must accept a corresponding level of additional risk.

He cited regulations as the biggest constraint to increasing returns. Since rent increases are capped in Korea, it is difficult to translate rent increases into profits—even when supply and demand become tight—unlike in the U.S. or Japan. On the other hand, he assessed that demand-side fundamentals are robust, driven by factors such as the influx of foreigners and international students, as well as rising rental demand due to the high cost of homeownership.

CEO Sales stated, “The success or failure of rental housing investment in Korea depends less on demand itself and more on how quickly one can secure scale,” explaining, “Since small-scale assets held by individuals account for a significant portion of the market, it is not easy to build a portfolio of the caliber institutional investors seek in a short period.” He continued, “There is sufficient momentum supporting the rental housing market,” adding, “The key is achieving scale.”

CEO Sales explained that as scale increases, operational efficiency can also be improved. This is because handling tenant recruitment, management, and pricing on a single platform can lower costs and steadily increase net operating income (NOI). Nubin’s decision to establish a joint venture (JV) with WeLive to enter the South Korean rental housing market was based on this assessment.

CEO Sales said, “The key is securing the right operating partner and aligning interests,” adding, “We must also verify whether the business model is scalable in the long term.”

He predicted that as this competition for scale intensifies, the number of market participants will naturally consolidate. In Europe as well, during the early stages of institutionalization in the rental housing market, institutional investors, real estate companies, and operating platforms entered the market one after another; however, the market subsequently reorganized around operators equipped with sufficient asset size, operational capabilities, institutional capital support, and competitive financing capabilities. CEO Sales forecasted that South Korea is also highly likely to follow a similar path in the long term.
Kicking Off

Fundraising in Asia… Expanding Investments in Korean Residential and Logistics

Sectors Nubin Real Asset is currently engaged in fundraising to expand its investments in Asia, including South Korea. This move appears to be based on the assessment that conditions for injecting new capital are improving, as the Asia-Pacific real estate market has shown signs of a recovery in transaction volume since the second half of last year. According to Nubin, the volume of real estate investment in the Asia-Pacific region in the second half of last year increased by 36% compared to the first half, with South Korea and Australia in particular showing growth rates of 30–40%.

However, CEO Sales does not expect this recovery to lead to a sharp expansion in investment in the short term. This is because uncertainty surrounding interest rates and inflation is growing again, raising the possibility that the gap between buyers’ and sellers’ price expectations will widen. Consequently, Nubin plans to selectively target assets backed by rental demand and strong cash flow rather than injecting capital into the market indiscriminately.

In this context, Nubin views rental housing and logistics as key investment areas in South Korea. CEO Sales stated, “We may consider office investments as well, provided assets with appropriate prices and terms become available, in addition to last-mile logistics,” adding, “The core of our investment decision lies not in the asset class itself, but in whether we can secure long-term rent growth and stable cash flow.”

In particular, Nubin maintains that if its first investment with Wib Living proves successful, it could significantly increase the amount of capital allocated to the Korean residential sector. The firm explained that once it is confirmed that a certain level of asset scale and target rate of return can be secured, it may consider not only follow-on investments through its existing Asia-Pacific strategy but also attracting additional institutional capital to the Korean rental housing market by utilizing Separately Managed Accounts (SMAs).

However, CEO Sales emphasized throughout the interview that an institutional environment must be in place to support institutional investors’ long-term capital commitments. While acknowledging the need for government regulation of the housing market, he explained that there must still be room to secure appropriate returns through rent growth and rising asset values. Simply put, long-term capital will only flow in if an environment is created where institutional investors can generate returns that justify sustained investment.

He also drew a clear line regarding negative perceptions surrounding the entry of institutional capital into the rental housing market. Although there are concerns that increased participation by institutional investors could lead to the excessive financialization of housing or fuel rent increases, CEO Sales explained that in countries such as the United States and Japan, the rental housing market continues to operate efficiently even after institutional capital has established itself as a major market participant. Therefore, rather than viewing institutionalization itself with suspicion, the focus is on creating an institutional framework where market stability and investment profitability can coexist.

Nubin Real Asset plans to expand its investment scope in Korea based on the country’s growth potential. CEO Sales stated, “We will continue to grow our (real estate investment) business in Korea,” adding, “We look forward to making more investments in the residential and logistics sectors in the future.”