The vacancy rate in Gangnam has begun to go downhill since the first quarter of last year. (image credit: Kobizmedia/ Korea Bizwire)
SEOUL, July 6 (Korea Bizwire) –Global IT firms have increasingly settled down in Gangnam district of Seoul, which has struggled with a growing vacancy rate due to the existing tenants’ relocating to other popular business towns such as Pangyo or Gangbuk regions.
Over the past year, the number of international firms relocated to Gangnam has increased by 133, from 1969 firms in January of last year, to 2102 firms in the same month of the year, according to the Seoul city government.
The renewed interest in Gangnam among the multinational IT businesses has come as welcome news for the real estate market of the “Beverly Hills” of South Korea, which has witnessed rising vacancy rates as expensive office rent has prompted a host of major companies’ ‘exodus’ from Gangnam. Leading gamemaker Nexon moved its company to Pangyo in December 2013 and NCsoft, another major game developer, also relocated to Pangyo in September last year.
In general, international companies’ settle down in Seoul has been on the wane: the total number of foreign-affiliate companies moving to Seoul dropped from 9410 in 2013 to 7975 in this year, yet Gangnam district alone is showing exceptional popularity to counter the overall trend.
Consequently, the number of “see-through” office buildings in the district could be reduced, to much relief of South Korea’s wealthy office town. After global financial crisis in 2008, Gangnam district’s vacancy rate had gone up to as much as 10.1 percent as of Q4 in 2012, as many companies couldn’t afford the infamously ‘super-expensive’ rents then.
The vacancy rate in Gangnam has begun to go downhill since the first quarter of last year; The rate has reduced to 8.9 percent in the first quarter of this year, from 9.3 percent over the same period of 2013. According to market watchers, a host of foreign companies in the retail, consulting and service firms, have settled down in Gangnam recently, contributing to the reduced vacancy rate.
These numbers are considerably lower than the vacancy rates of other office town in Seoul, such as Gangbuk Area. The rate in Yeouido district, dubbed as “Wall Street of Seoul” has recorded 17.5 percent in Q1 this year, in a testament to Gangnam’s ongoing popularity as the optimized office town in Seoul.
Many of these newly-relocated companies are conspicuously IT companies: Pure Storage Korea, for example, which has nestled in around the Gangnam Station, is a IT company based in the United States; Kasperskylab, an international mobile security firm and Kabaam, a game company have also settled down in Gangnam; Techno Blood, a Japanese game maker renowned for producing “Lagnarok”and more importantly, Alibaba, a Chinese e-commerce brand, have chosen Gangnam as their business operation sites.
Why is these multinational brands’ rush into Gangnam? The reason seems to be because Tehran street, one of the main streets in Gangnam, is dotted with many software and game companies, and Gangnam has convenient transportation linking to Pangyo Techno Valley, an outskirt of Seoul known as Silicon Valley of Korea.
Real estate experts expect the office lease market in Gangnam district will enjoy the ongoing “busy momentum” in the near future given that demand is still outpacing the supply. As opposed to other down towns of Seoul or Yeouido office towns where more of high-rise office buildings are due to be constructed, the office supply in Gangnam is limited.
Written by J. H. Kim (jhkim@koreabizwire.com)
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