The rapid growth of coworking spaces in Seoul, which surged during the COVID-19 pandemic, is now showing signs of deceleration. (Image courtesy of JustCo)
SEOUL, Sept. 19 (Korea Bizwire) – The rapid growth of coworking spaces in Seoul, which surged during the COVID-19 pandemic, is now showing signs of deceleration.
This shift is attributed to a decline in demand from the startup sector and the recent bankruptcy of WeWork, the pioneer of the coworking model.
According to a report released on September 18 by CBRE Korea, Seoul currently hosts 278 coworking spaces, covering approximately 630,000 square meters.
The Gangnam Business District (GBD) dominates this landscape, housing 66% of these spaces with 136 locations spanning 347,000 square meters.
The Central Business District (CBD), including Jongno-gu and Jung-gu, follows with 44 spaces (109,000 square meters), while the Yeouido Business District (YBD) hosts 36 locations (69,000 square meters).
The market is largely controlled by six major operators – FastFive, SparkPlus, WeWork, Regus, The Executive Centre, and JustCo – which collectively account for 42% of the market share. Notably, the top two players, FastFive and SparkPlus, are domestic companies.
The growth trajectory of coworking spaces in Seoul has been remarkable. From single-digit annual openings until 2017, the city witnessed a surge with 14 new locations in 2018, 18 in 2019, 14 in 2020, 21 in 2021, and 15 in 2022.
This rapid expansion was largely fueled by the increased demand for flexible workspaces during the pandemic-induced remote work era.
However, the trend has reversed sharply. In 2023, only nine new locations opened, and as of the second quarter of 2024, merely two new spaces had been added this year.
This slowdown is attributed to several factors. With the end of the COVID-19 pandemic, many companies are requiring employees to return to traditional offices.
Additionally, there’s been a contraction in the startup ecosystem, a primary client base for coworking spaces.
The commercial real estate market has also played a role. CBRE reports that as of the second quarter of last year, the average vacancy rate in Seoul’s three major business districts was just 1.8%, well below the natural vacancy rate of 5%.
This landlord-favorable market has reduced incentives for property owners to lease to coworking space operators.
The bankruptcy filing of WeWork has further dampened enthusiasm, making landlords more hesitant to embrace coworking tenants.
In response to these challenges, coworking space operators are pivoting their strategies. They’re increasingly focused on managed services and expanding beyond the three main business districts.
In 2022, there were more new openings outside these core areas than within them, a trend that has continued into 2024.
CBRE predicts that the future of coworking spaces in Seoul will be characterized by a managed services model and expansion into new districts.
Operators are expected to diversify their services, offering value enhancement for small and medium-sized buildings, as well as leasing advisory and consulting services.
M. H. Lee (mhlee@koreabizwire.com)
