"Sold for 21.9 Billion KRW"... Significance of Officetel Pre-Sale Rights Appearing at Art Auction [Reporter’s Notebook]

Last month, a officetel pre-sale right was auctioned at an art auction, drawing attention by being sold for 21.9 billion KRW. This price surpassed the highest price ever achieved for Korean artwork at auction, Kim Whanki's Universe (13.2 billion KRW). The winner was a single unit (exclusive area 261.30㎡) of the ‘The Palace 73’ officetel, scheduled to be constructed in Banpo-dong, Seocho-gu, Seoul.

This was the first time a real estate pre-sale right was offered at an art auction. The auction started at 16 billion KRW and, after competitive bidding, sold for a price higher than the original pre-sale price of 21 billion KRW. The result of this auction was evaluated as having revitalized the art market, which had been stagnant for some time.

THE PALACE 73 by RICHARD MEIER (Bird's-eye view) [Photo by Seoul Auction]

This officetel attracted attention in the industry as it was designed by Richard Meier, an American architect and recipient of the Pritzker Prize, often called the "Nobel Prize of Architecture." The unit offered was interior-designed by Meier Partners, the architectural firm founded by Meier, and art consulting was provided by Seoul Auction. Seoul Auction explained, “We considered the rarity and artistic value that the item would possess beyond being a simple real estate asset.”

As the global art market has entered a downturn following a period of adjustment, the auction house has recently been exploring new avenues with various ideas. Previously, in 2019, an entire building was auctioned, raising questions about the range of items that art auctions can cover. The theme park ‘I Like Strawberries’ (total floor area 2,480.33㎡, approximately 750 pyeong) located in Heyri Art Village, Tanhyeon-myeon, Paju-si, Gyeonggi-do, was offered at Seoul Auction’s art auction, capturing public attention. The building, opened in 2004, was estimated at 4 to 6 billion KRW. Its artistic value was reappraised in 2014 when co-designer architect Cho Min-seok received the Golden Lion Award at the Venice Biennale International Architecture Exhibition that year.

Exterior view of 'I Like Strawberries Theme Park,' the first real estate item to be auctioned in the domestic art auction in 2019.
[Photo by Seoul Auction]

There have been several previous experiments with offering real estate at art auctions. Seoul Auction has consistently tested the potential of high-end real estate as auction items by privately selling the former Korea Art Museum building in Gahoe-dong, Jongno-gu, Seoul, designed by architect Kim Joong-up in 2011 (estimated at 30 billion KRW), and a house in Seongbuk-dong designed by American architect Steven Holl in 2013.

However, the auction house is not a real estate brokerage. How was the ‘The Palace 73’ pre-sale right auctioned? A Seoul Auction official explained, “Instead of charging a buyer’s commission, we agreed to receive marketing fees from the sales agency.” The official added, “Building on this auction result, we plan to expand the range of items to include products with rarity and artistic value such as real estate, automobiles, wine, and luxury bags.”

The art auction market in the first half of this year remained sluggish. According to the '2024 Domestic Art Auction Market First Half Review' announced on the 27th of last month by the Korea Art Market Appraisal Association, the total transaction amount was approximately 91.7 billion KRW, a 13% increase from last year (81.1 billion KRW). However, compared to 2022, when the art market was strong, it was only about 63%, and the auction success rate was 49.8%, falling below 50% for the first time in five years. In this market atmosphere, the result of this auction is expected to be an important milestone for art auctions, which have secured objectivity and transparency in value assessment, in expanding the category of auction items in the future.