DWS "Pangyo and Bundang, Attractive Investment Destinations in Asia"

Formation of Clusters in IT and Gaming
Office Rent Expected to Rise

The view of Pangyo Techno Valley.

A global asset management firm has drawn attention by identifying Pangyo and Bundang in Korea as attractive investment destinations in the Asia-Pacific region. They share the common characteristic of being emerging business districts, similar to Macquarie Park in Sydney, Australia, and the Tenjin and Hakata areas in Japan.

According to industry sources on the 21st, DWS, the asset management subsidiary of Germany's Deutsche Group, stated in its "Asia-Pacific Real Estate Research Report (APAC Emerging Office Locations)" that Melbourne City Fringe and Fortitude Valley in Brisbane, Macquarie Park in Sydney, and Tenjin and Hakata in Fukuoka, Japan, along with Pangyo and Bundang in Korea, will offer attractive investment opportunities.

The commonality among these cities is that they are newly emerging business districts. DWS explained that high-quality office buildings with excellent accessibility in major emerging business districts will benefit from improved transportation and the formation of new IT, gaming, and life sciences clusters.

In particular, Pangyo and Bundang are noted as major hubs for the IT and gaming industries, located near densely populated areas of the Seoul metropolitan area. DWS predicted, "Office rents in this area are relatively lower compared to downtown areas," and "in the long term, the rent increase rate will exceed the market average." The sales cap rate (capitalization rate) is also expected to quickly catch up with existing downtown areas as the maturity of these business districts increases.

DWS added, "New economic growth drivers such as IT and content industries have transformed these emerging districts into 'work-residence-play' zones," and "growth has accelerated further due to improved accessibility provided by the Shinbundang Subway Line."

DWS also expects that the COVID-19 pandemic will lead to increased capital inflows into startups based on life sciences, content, and IT industries. Furthermore, they forecast, "This will particularly increase co-working spaces," and "offices in emerging business districts will provide stable long-term rental income supported by infrastructure improvements and demand from new business clusters."

Meanwhile, according to Kyobo Realco, a commercial real estate service company, the office vacancy rate in the Bundang area was 0.22% as of the third quarter, and except for some small-scale leased areas in medium and small offices, all vacancies within the district were resolved. Additionally, according to JLL Korea, the effective rent (rent + maintenance fees) in the Pangyo area rose from around 40,000 KRW per pyeong in 2013 to 73,000 KRW by the end of the second quarter this year. During the same period, the average office rent in Seoul increased only from 70,000 KRW to 76,600 KRW.

This content was produced with the assistance of AI translation services.