"No Empty Offices Amid Office Crisis in Pangyo or Bundang"

Pangyo and Bundang Office Vacancy Rate 0%

Total Office Transaction Amount Hits Record High of 17 Trillion KRW

Companies Prefer Pangyo as First Choice

But Actual Contracts in Bundang Account for 57.9%

[Asia Economy Reporter Kim Min-young] The office space crisis originating in Pangyo New Town is spreading to Bundang New Town. Companies unable to secure space in Pangyo are flocking to the surrounding areas, resulting in a ‘zero vacancy’ status in major building districts around Bundang New Town. Large IT companies such as Naver, Kakao, and NCSoft are competitively expanding their territories in this area, combined with rental demand from startups and the increased need for hub and shared offices that emerged during the COVID-19 era. Industry experts widely agree that the leadership of the office market has shifted from Seoul’s Gangnam and downtown areas to the Pangyo-Bundang region. Especially, once the construction of the 2nd and 3rd Pangyo Techno Valleys is completed, it is expected to become the largest core business district in the country.

◆Gangnam? No, It’s Pangyo= According to the AlSquare Big Data Office on the 7th, the vacancy rate of BBD, referring to the core business districts of Pangyo and Bundang as of the third quarter, recorded 0%. This means there are no vacant offices at all.

In Pangyo, the vacancy rate for large A-grade offices with a total floor area of over 10,000 pyeong was already 0%. As everyone rushes to set up offices in Pangyo, rental prices have soared. The office rent in Pangyo, which was 55,500 KRW per 3.3㎡ in the second quarter of 2017, rose to the low 60,000 KRW range between 2018 and 2020, and further increased to 73,100 KRW in the second quarter of this year.

Due to the difficulty in finding offices in Pangyo, tenant demand has shifted to Bundang. According to AlSquare, among 76 companies that preferred Pangyo as their first choice for leasing over the past three years, the actual contract distribution was 57.9% in Bundang and 36.5% in Pangyo, showing a higher rate in Bundang. An AlSquare official analyzed, "This means many companies that could not lease offices in Pangyo opted for offices in the nearby Bundang area." As the office rental war in Pangyo spread to Bundang, the phenomenon of zero vacant offices also occurred in Bundang.

◆Nexon, NCSoft, SK Bioscience Establish Bases One After Another= In the past three years, the number of companies relocating or expanding their office spaces in Pangyo and Bundang has been increasing. These companies come from various industries including IT, healthcare, and bio sectors. Representative companies based in Pangyo include Nexon, NCSoft, Krafton (partially), Snow, Hyundai Motor Company’s Advanced Technology Center, Theragen Bio, Medipost, Huons, and SK Chemicals.

NCSoft has been renting more than half of Alpharium Building 1 and the entire Building 2 in Pangyo since early this year. Although remote work has increased, the IT boom and new hires have led to an expansion of office space. Krafton, famous for Battlegrounds, also has part of its organization working in a Pangyo office this year. Snow, a Naver subsidiary, also established its base in Pangyo this year, and Hyundai Motor Company’s Advanced Technology Center is scheduled to move into Alphadom City in Baekhyeon-dong this year.

Companies that could not secure offices in Pangyo turned their attention to nearby Bundang and relocated their headquarters there. SK Bioscience, a COVID-19 vaccine developer, recently moved its headquarters to Bundang, and AK Plaza, Doosan, KT, and Doosan also established new bases in Bundang.

◆Transaction Amount Hits Record High of 17.3 Trillion KRW= As demand concentrates in the Pangyo and Bundang areas, the total transaction amount for offices sold at 10 billion KRW or more in Seoul, Bundang, and Pangyo reached a record high of 17.3 trillion KRW. This figure has already surpassed last year’s transaction amount of 13.6 trillion KRW.

An AlSquare official explained, "IT companies and startups, beneficiaries of the prolonged COVID-19 pandemic, have led the market sentiment. Companies are flocking to Pangyo and Bundang, which are advantageous for hiring developers and sharing industry information, resulting in increased demand for office purchases."

In fact, the Teachers’ Pension Fund recently purchased a 50% stake in Block 6-1 of Alphadom City, located in the center of Pangyo, at 27 million KRW per 3.3㎡. This is a mammoth building with a total floor area of 162,720㎡.