Higher-for-longer rates open door for private real estate debt: DRC Savills IM
Key Takeaways
- •Higher interest rates are creating better entry conditions for private real estate debt lenders as property values reset and refinancing needs increase.
- •Savills Investment Management said Japan’s real estate market remains resilient despite the Bank of Japan’s tightening bias.
- •Savills Korea has been appointed to sell four office buildings owned by AmorePacific Corp. as part of the company’s portfolio reshaping.
- •JLL and Savills will lead the sale of Seoul Square, which is valued at about 1.4 trillion won, or $1 billion.
- •Savills said roughly $500 billion in assets held by undivested closed-ended equity funds are expected to come to market over the next few years.
Higher-for-longer interest rates are creating an opening for private real estate debt, as repriced property values, higher coupons and a refinancing wall are improving conditions for new lenders, according to DRC Savills IM. Private real estate debt refers to loans extended by non-bank lenders and secured against property, while the “refinancing wall” describes a cluster of loans written during the low-rate era that now mature and must be refinanced at higher borrowing costs.
Japan’s real estate market has also remained resilient despite the Bank of Japan’s tightening bias, which comes as the country shifts away from the ultra-loose monetary policy it maintained for years. Savills Investment Management said expected rental growth, together with stable and predictable cash flow, can offset lower yields.
Savills Korea has been appointed as the sale manager for four office buildings owned by AmorePacific Corp., in one of the cosmetics group’s largest non-core asset divestments in Korea’s provincial markets. According to Savills, the properties are being prepared for sale as part of the company’s portfolio reshaping.
Separately, JLL and Savills have been selected to lead the sale of Seoul Square, a landmark office tower located directly opposite Seoul Station. The building is valued at about 1.4 trillion won, or $1 billion, adding to a growing pipeline of prime assets coming to market in Seoul.
Savills has also said the global real estate market is expected to rebound significantly over the next few years. The firm said around $500 billion worth of real estate assets held by undivested closed-ended equity funds are likely to come to market. Closed-ended funds typically have fixed lifespans, meaning assets still held late in a fund’s life generally must be sold so capital can be returned to investors.
In another sector update, Savills Investment Management said European purpose-built student accommodation — housing developed specifically for students — is gaining strong appeal among real estate investors. In the 2025 INREV Investor Intentions survey, run by the European Association for Investors in Non-Listed Real Estate Vehicles, student accommodation ranked third.
