Connecting Korea: Government Infrastructure and Incentives Are Shaping Real Estate

Journal of Property Management, May-June 2016 | Go to article overview

Connecting Korea: Government Infrastructure and Incentives Are Shaping Real Estate


BY THE IREM GLOBAL SERVICES DEPARTMENT

In Seoul, serious efforts have been put forth by government officials and city planners to lure businesses out of established business districts and into newly created districts. Enticed by low construction costs, subsidies and other incentives, many large businesses and conglomerates have already made the move to new neighborhoods in and around Seoul. In addition, the ever-expanding web of the Korean rail system means that what were previously seen as far-flung districts are now within easy reach for employees.

The newly formed business districts are restricted by industry, the most prominent being Sangam Digital Media City restricted to media and entertainment firms) and the Pangyo Tech Valley (restricted to information technology, biotechnology and other technological fields). Industry-specific business districts encourage growth and innovation for the companies that occupy them. Organizations benefit from access to shared resources within close proximity. In addition, lower land costs mean that organizations can construct new headquarter offices front the ground up--an option that isn't readily available in the established business centers. Research compiled in 2015 by CBRE, The Decentralization of the Seoul Office Market, explains that organizations that made the move to these districts, specifically, saved an average of40-50 percent in rental costs.

While Sangam DMC and Pangyo are perhaps the most distinctive new business districts, formed in 2007 and 2009, respectively, other up-and-coming business districts include Songdo Business District (for the financial and multinational sector), Jamsil (noted for the 123-floor Lotte World Tower), Munjung (for the legal sector) and Yongsan (residential and office).

> TRENDS IN 2016

Edward Yusuk Kim, CPM, CEO of REMS Asset Management Co., Ltd. in Seoul, reported, "The tenant-driven office markets in Korea have been getting tougher in recent years and also we expect that 2016 will be also a tough year. We see a high supply of office space in Seoul CBD (Central Business District) and new city, Pangyo, in the southern part of Seoul."

In 2016, a second wave of development is emerging in the Magok district (for R&D firms), and the second Pangyo tech valley. Magok, currently being developed by SH Corporation, will be six-times larger than the Sangam DMC. Furthermore, in coming years, some of the new industry-restrictive districts will begin relaxing restrictions on the types of companies allowed to move in. …

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