[Interview] "Medical Arcade Strategy Will Enhance Asset Value of CBD Office Buildings"

Interview with Eunsang Jung, Head of Research Center at NAI Korea

Reconfiguring Lower Floors of Offices into Medical and Retail Facilities

"Foreign Tourists' Consumption Patterns Shifting to Medical"

An Attractive Strategy for the Exp

Eunsang Jeong, Head of the Research Center at NAI Korea, is being interviewed in the NAI Korea conference room in Gangnam-gu, Seoul. Photo by Jin-Hyung Kang

"We believe that a strategy of reconfiguring the lower floors of office buildings in Seoul’s Central Business District (CBD) into medical or retail facilities will prove effective for office building investments."

Eunsang Jeong, Head of the Research Center at NAI Korea, stated in an interview with The Asia Business Daily, "In the Seoul office market, the 'medical arcade' strategy of converting lower office floors into medical or retail facilities is expanding." He explained that the high foot traffic from major tourists and visitors makes complex development strategies feasible, increasing the appeal of such transformations.

Jeong is an expert with 20 years of experience in commercial real estate consulting and brokerage. He has been involved in high-profile projects, including the sale of the Samchang Building development site near Chungjeongno, Seodaemun-gu, valued at 11.88 billion won, and in formulating monetization strategies for revenue-generating buildings owned by Kyung Hee Academy.

He noted that this trend is particularly prominent in the CBD areas such as Jongno and Euljiro. The Pagoda Building in Jongno-gu stands as a representative example, as it is scheduled to be remodeled to accommodate medical facilities and a hotel.

Jeong explained, "The consumption patterns of foreign tourists visiting Korea are shifting from simple sightseeing to K-Medical experiences. As a result, reconfiguring the lower floors or even entire buildings into medical or retail facilities to enhance asset disposal value is rapidly emerging as a core solution."

In the CBD, several new developments are expected to be supplied, including G1 Seoul with a total floor area of 143,400 square meters, as well as Rene Square and Ieul Tower. With forecasts of future vacancies and declining rental rates, the medical arcade strategy is being evaluated as a potential breakthrough for the CBD in particular.

Jeong also highlighted that corporations’ criteria for selecting office locations are gradually changing. In addition to accessibility and infrastructure, companies are now focusing on spaces that reflect their identity and enhance employee productivity—factors such as interior design, amenities, views, and ceiling heights are increasingly valued.

He observed that this phenomenon is evident in Seongsu-dong, Seoul, which has transformed into a district where companies like Krafton, Musinsa, and Gentle Monster have established their presence, allowing them to realize their brand identity. "Whereas office location selection in the past followed a standardized formula of transportation convenience and efficiency, recent corporate strategies can be summarized as an emphasis on identity realization," he said. "Companies now view office space not just as a workplace, but as a space that embodies corporate philosophy, attracting talent and redefining the value of the district."

With demand concentrating on offices located in major hubs, Jeong analyzed that global investors are showing keen interest as well. "Overseas funds typically invest in Seoul offices based on two factors: securing stable cash flow as a financial investment and the potential for capital gains upon resale," Jeong stated. Global private equity firm Blackstone, for example, acquired Arc Place in the Gangnam Business District (GBD), later selling it in 2024 for a profit of 300 billion won. In 2024, SM Group purchased its Gangnam headquarters and is reportedly working to convert it into a hotel through collaboration with multinational hotel chain Travelodge Asia.

However, he also pointed out the need to address the widening gap in vacancy rates within key office districts, as only a limited number of buildings can meet the concentrated demand. According to research by NAI Korea, in the fourth quarter of last year, the vacancy rate in the Teheran-ro area of the GBD was 1.15%, Gangnam-daero was 0.92%, and Yeongdong-daero was 0.37%. In contrast, buildings located on side streets, rather than main roads, see significantly reduced demand.

Jeong added, "The vacancy rate for buildings on side streets in Gangnam exceeds 15%. Even startups tend to avoid moving into buildings that are not on main roads." He explained that office location and branding are important factors for recruitment and investment. "It is now time for policies to help buildings on side streets develop a unique identity," he concluded.

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