Despite Rent Increases, Pangyo Office Vacancy Rate Remains Below 1%... Growing into One of the Four Major Business Districts

Geographical Advantage Near Gangnam Favors Many Owner-Occupied Buildings
"Some A-Grade Buildings Have Higher Effective Rents Than the Three Major Districts"

Vacancy Rate Trends in Seoul's Three Major Office Districts and Pangyo District / Provided by JLL Korea

[Asia Economy Reporter Noh Kyung-jo] The office market in Pangyo New Town, Seongnam City, Gyeonggi Province, has recorded a vacancy rate in the 0% range despite rising rents. Since its completion in 2012, Pangyo Techno Valley 1 has grown over the past 10 years to become one of the four major business districts in South Korea.

According to the '2022 Pangyo Office Market Report' recently published by global comprehensive real estate services company Jones Lang LaSalle (JLL) Korea on the 15th, the office vacancy rate in the Pangyo area has steadily remained in the 0% range since 2020. Although it approached 0% since the second half of 2017, the number of vacant offices slightly increased around the second quarter of 2019.

It is analyzed that the geographical advantage of being only 10 km in a straight line from Seoul's Gangnam area and the high proportion of owner-occupied buildings (about 65% of supply offices) resulting in fewer offices available for lease are key factors. The report also noted that since 2019, as the 10-year resale restrictions on Techno Valley 1 have been gradually lifted, offices available for transaction have appeared, but vacancies are being quickly resolved.

In fact, Kakao and Naver, which were early tenants of Kakao Pangyo Ajit (Alpha Dome Block 6-1) and Pangyo Tech One (Alpha Dome Block 6-2), are known to have eliminated all leasable vacancies. A JLL Korea official predicted, "Considering the market situation where the Gangnam area, with tenants in similar industries, also records a vacancy rate in the 0% range, the Pangyo area will continue to maintain a low vacancy rate."

Seoul's Top 3 Office Districts and Pangyo District Rent Trends / Provided by JLL Korea

Rents are trending upward. As of last month, the actual rent per pyeong in the Pangyo area was 92,872 KRW, similar to the Yeouido area (93,723 KRW). It is still lower than the Gangnam area (122,458 KRW). However, the official stated that since rents have continuously risen since 2013, some A-grade buildings in the Pangyo area have actual rents higher than buildings in the three major Seoul districts.

New office supply planned in the Pangyo area includes the NCSoft headquarters to be constructed on the site of Pangyo District Office in Sampyeong-dong, the Woowa Brothers headquarters and Cha Biotech advanced bio-facility (CGB) under construction in Pangyo Techno Valley 2. The third Techno Valley has also been under development since 2018 on a land area of approximately 5.83 billion square meters and is scheduled for completion in two years.

A JLL Korea official said, "The Pangyo area functions not only as a business district but also as a residential area, making it self-sufficient," adding, "When all three Techno Valleys are completed in 2024, it will become a massive cluster with a total of 2,500 companies and about 130,000 residents."