JYP Entertainment's new headquarters construction has not yet broken ground. With rising construction costs across the industry, plans to begin construction in the second half of this year have hit a snag due to exceeding the existing budget. It has been reported that additional work is underway internally to re-estimate construction costs.
According to the entertainment industry on the 8th, JYP was initially scheduled to start construction of its new headquarters in the second half of this year, but the rise in construction costs has made the timing for commencement next year uncertain. Although JYP has never officially disclosed a move-in date, there are projections that suggest occupancy would occur in early 2029 after completion in 2028. With the delay in construction, the timing for moving in is expected to be pushed back further.
To construct the new headquarters in 2023, JYP won a bid for 10,675 square meters of land in the high-density retail area of the Godeok Gangil District from Seoul Housing and Urban Improvement Corporation (SH Corporation) for approximately 756 billion won. This location is part of the Godeok Business Valley development in Gangdong-gu.
The new headquarters will consist of 5 basement levels and 22 above-ground floors, with a total floor area of 59,475 square meters. The design will be handled by Yoo Hyun-jun Architectural Office, led by Yoo Hyun-jun, a professor at Hongik University.
Godeok Business Valley currently houses 18 corporations, including the Swedish furniture brand IKEA, Aju Design Group, and Cuckoo Electronics. Once all corporations, including JYP, have moved in, the number of commuting employees is expected to reach about 11,400.
Currently, JYP is using a building located in Seongnae-dong, Gangdong-gu, as its headquarters. Due to insufficient space to accommodate all employees, the company is leasing additional buildings near its current headquarters and near Gangdong District Office to place its staff. It is necessary to have the new headquarters to gather many employees in one location.
The key issue is the construction expense of the new headquarters. The industry estimates that the expense needed for constructing JYP's new headquarters will exceed 200 billion won, calculated at the cost of 10 million won per pyeong for office buildings.
However, construction expenses have risen due to increases in international raw material prices, exchange rates, and construction labor costs. The construction cost index, which measures price fluctuations for direct construction costs, stayed around 127 in 2023 but rose to 131 in July this year.
When direct costs increase, management expenses, profits, and financial costs also increase in a chain reaction, which causes the actual total construction cost increase to be even greater. For large-scale construction projects like JYP's new headquarters, differences can vary by hundreds of millions of won due to extended timelines.
JYP's performance and cash assets are relatively solid. In the second quarter of this year, JYP recorded a consolidated revenue of 215.8 billion won and an operating profit of 52.9 billion won, achieving the highest quarterly performance ever. Cash assets, which were 139.6 billion won at the end of 2022, increased to 190.6 billion won last year and rose to 206.4 billion won in the first half of this year. Thanks to its robust financial structure, JYP was able to pay the down payment of 7.6 billion won and the remaining balance of 68 billion won in cash for land acquisition.
However, with expenses planned for the record business, concerts, and labor costs, the increased construction cost poses a financial burden. This has led to discussions of issuing convertible bonds (CB), selling treasury shares, and utilizing collateral loans. JYP is currently reported to be discussing the construction costs and funding methods for the new headquarters.
It seems that Gangdong-gu will need more time to enjoy the 'JYP effect.' During the selection process for the headquarters site, several local governments, including Hanam City, expressed interest, but JYP ultimately chose the Godeok Gangil District in Gangdong-gu.
An industry insider noted, 'Gangdong-gu thinks of JYP's new headquarters as a landmark and is highly interested in the construction,' and added, 'The economic impact is already manifesting, with rising rent for commercial properties close to the new headquarters as well as advertising costs for bus stops.'
JYP stated, 'There is no separate position or opinion regarding the construction of the new headquarters.'