[Practical Finance] Commercial Facilities Embracing Business and Industrial Complexes Achieve Complete Sell-Out Streak

Stable Revenue with Robust Population Inflow and Strong Demand

[Asia Economy Reporter Jo Gang-wook] There is a well-known saying in real estate: "You won't lose if you just follow the big corporations." This means that whether it's a house or land, purchasing real estate near large corporations generally does not result in losses. These areas attract a substantial population, including not only employees working at the large corporations but also workers from nearby partner companies, ensuring solid demand.

The same applies to industrial complexes. Despite the prolonged impact of COVID-19 causing a downturn in the commercial market, commercial facilities within complexes located near business districts or industrial complexes are showing strong performance. Due to the nature of commercial properties where demand directly translates into sales, stable revenue generation can be expected based on secured fixed hinterland demand.

◇ Yeouido Sold Out in One Day... Ulsan Also 12 to 1 = In June last year, Hills State Yeouido Pine Luce’s commercial facility, Hills Avenue Yeouido, located within the complex in Yeouido, one of Seoul’s major business districts, was fully contracted within a day of the contract start. Similarly, the commercial facilities within the Ulsan Jiwell City Xi complex, located directly opposite Hyundai Heavy Industries and launched for sale in December last year, also achieved a quick sell-out.

The enthusiasm for sales continues this year as well. The commercial facilities within Ulsan New City Aileen’s Garden Phase 1, located near the Ulsan Industry-Academia Convergence District and the Petrochemical Industrial Complex, recorded an average competition rate of 12.4 to 1 in the bidding held last month, with all stores contracted on the same day. Additionally, the Inno City Ashiang commercial facilities supplied in Gwangju-Jeonnam Innovation City last month were sold out with an average competition rate of 8.4 to 1.

Commercial facilities within complexes that include business districts and industrial complexes can secure resident households as fixed demand, reducing vacancy concerns relatively. Furthermore, as industrial complex workers and related industry employees move in, the surrounding commercial areas develop rapidly, allowing for stable rental income as well as potential capital gains.

◇ Commercial Facilities Adjacent to Industrial Complexes Increase in Value = According to the National Tax Service’s standard market price data for commercial buildings and officetels, the market price per square meter of the first-floor commercial facility in ‘Songdo The Sharp First World E/F Building,’ which faces the Incheon Songdo International Business District, rose by 15.74% from 3,048,000 KRW in January 2018 to 3,528,000 KRW as of January this year. In contrast, the standard market price of a nearby general S commercial building increased only 1.32%, from 4,541,000 KRW to 4,601,000 KRW during the same period.

Monthly rents also show differences between commercial facilities within complexes adjacent to industrial complexes and general commercial buildings. For example, a 38㎡ (exclusive area) first-floor commercial unit in ‘Yeongtong I-Park Castle’ near Samsung Digital City in Suwon, Gyeonggi Province, is listed with a deposit of 50 million KRW and monthly rent of 2.5 million KRW (based on Naver Real Estate), whereas a nearby general commercial unit of 34㎡ is listed with a deposit of 20 million KRW and monthly rent of 1.1 million KRW.

◇ Interest in First Half Sales in Pangyo, Songdo, Sejong, etc. = In the first half of this year, commercial facilities within complexes near industrial complexes in key areas are scheduled for sale, drawing significant attention.

'Aerial View of Pangyo Ice Square (C2 Block)'

In Pangyo 2nd Techno Valley, Seongnam City, Gyeonggi Province, where about 750 companies are expected to move in, ‘Pangyo i-Square’ is currently on sale. It consists of 45 commercial units from basement level 1 to the 3rd floor, along with 251 officetel units. The complex houses approximately 30,000 pyeong of office facilities, officetels, and hotels, providing fixed demand. Additionally, it covers demand from Pangyo 1st Techno Valley and Pangyo 3rd Techno Valley nearby, securing a hinterland demand of about 2,500 companies and approximately 130,000 people. Accessibility is excellent with proximity to Gyeongbu Expressway, Metropolitan Area 1st Circular Expressway, Daewang Pangyo Road, Bundang Naegok Urban Expressway, and Yongin Seoul Expressway. Pangyo Station, served by the Shinbundang Line and Gyeonggang Line, allows easy access to Gangnam.

The Sharp Songdo Ark Bay.

Posco Construction is selling ‘Arc Bay Street,’ a mixed-use commercial facility in Block B3, District 1, Songdo International City, Yeonsu-gu, Incheon. It consists of 167 units across floors 1 to 3. It secures fixed demand from residents of ‘The Sharp Songdo Arc Bay’ apartments and officetels, totaling 1,030 households, and is located within the Songdo International Business District, making demand acquisition easy. It is adjacent to International Business District Station on Incheon Subway Line 1 and close to the 2nd Gyeongin Expressway, facilitating convenient access to Incheon International Airport, southwestern Gyeonggi, and Seoul.

Kumho Construction, Shindongah Construction, and HMG Partners will sell the ‘Sejong Riches Hill’ commercial facilities this month in blocks H2 and H3 of Sejong City’s 6-3 Living Zone. The facilities consist of 192 units across floors 1 and 2 and secure fixed demand from 1,567 households of ‘Sejong Richensia Familier.’ There is also abundant demand from government office and administrative agency workers stationed nearby.