Office Shortage Sparks Expectations for Rising Value of Knowledge Industry Centers

An aerial view of the 'Baegot Bizlive Center,' a knowledge industry center to be sold in August in Baegot New Town, Siheung-si, Gyeonggi-do

As corporate leasing demand increases, office vacancy rates have fallen to their lowest level in 13 years, and knowledge industry centers, known as "apartment-style factories," have re-emerged as alternative investment destinations. Additional regulatory easing measures, such as significantly expanding the types of businesses allowed in support facilities within knowledge industry centers, are also expected to act as positive factors.

According to the Korea Industrial Complex Corporation on the 21st, as of the end of June this year, there were 1,369 knowledge industry centers nationwide. This represents a 9.25% increase compared to 1,253 centers last year and a 184.61% increase compared to 481 centers in 2010. Knowledge industry centers offer relatively lower sale prices compared to typical commercial buildings and officetels, and corporations can obtain loans up to 80%, making investment possible with relatively low costs. Initial tenants can also benefit from a 50% reduction in acquisition tax and a 37.5% reduction in property tax, and resale is allowed, making these centers popular niche products in income-generating real estate recently.

In particular, as the housing market faces strong regulations, a balloon effect has occurred with investment demand shifting toward commercial and office use. According to data from the Korea Real Estate Board, a total of 380,849 commercial and office buildings were traded nationwide last year. This accounts for 18.01% of all building transactions, the highest ratio since 2006. Especially, non-officetel buildings represented by knowledge industry centers accounted for 215,816 transactions last year, making up 56.67% of all commercial and office building transactions.

The recently prepared amendment to the "Enforcement Decree and Revised Rules on the Industrial Cluster Activation and Factory Establishment Act" is expected to be another positive factor for knowledge industry centers. According to the amendment, the types of businesses allowed to move into support facilities within knowledge industry centers will be significantly expanded from existing banks, pharmacies, and daycare centers to all service industries except agriculture, gambling, and housing supply businesses. The amendment also includes provisions allowing information and communication industries and knowledge industries to move into knowledge industry centers established on factory sites within industrial facility zones in industrial complexes.

However, caution is advised regarding interest rate hikes and oversupply of knowledge industry centers. Most newly established knowledge industry centers are concentrated in the metropolitan area, and vacancy rates are increasing in cities such as Hwaseong and Hanam. An industry insider said, "While the advantage is that loan regulations are relaxed, the high loan ratio means profitability can deteriorate rapidly during periods of rising interest rates," adding, "It is necessary to consider location and future demand when approaching investments."

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