"The down payment of 10% for the Knowledge Industry Complex sale contract and the interim payments and interest paid so far can be forfeited, and there are properties that have a negative premium of up to 30%." (A real estate agent from a brokerage firm in Deok-eun-dong, Goyang, Gyeonggi Province)
Once selling like hot cakes as an alternative investment to apartments due to the past real estate boom, Knowledge Industry Complexes are now suffering from large vacancies.
Hit hard by the real estate market downturn and tightened loan regulations, and unable to find tenants due to the economic recession, properties with forfeited down payments are flooding in, and the number of Knowledge Industry Complexes transitioning to public sales and auctions is increasing.
At a Knowledge Industry Complex B located in Deokyang-gu, Goyang, at 11 a.m. on the 16th, as lunch time approached, there seemed to be more workers wearing work uniforms and safety shoes than people who appeared to be office workers. Next to this Knowledge Industry Complex, construction was underway for a Knowledge Industry Complex C with around 1,000 units.
In the Deok-eun district of Goyang, 2,000 units of Knowledge Industry Complexes are expected to be established across 6 out of 12 business lots by next year. If the remaining 6 lots are supplied, about 5,000 units of Knowledge Industry Complexes are expected to be built in the Deok-eun district alone.
Knowledge Industry Complex B started occupancy in August of last year and has a total of more than 800 units, but currently half are vacant. The retail spaces located at the entrance of the Knowledge Industry Complex on the first floor also have yet to find tenants.
Even in the 21st floor, which was quite popular because of its view of the Han River to the south during the sale, only 5 out of 14 units had employees working. The remaining 9 units were filled with advertising materials and were left empty, only displaying rental inquiry banners.
The situation was the same when going down to the 17th floor of the same building. All 14 units on the 17th floor were in a vacant state, covered only with leaflets and promotional banners.
◆Half of the 11,000 units in the Goyang Knowledge Industry Complex are vacant
According to data received from Goyang City councilors Son Dong-sook and Jang Ye-seon, the occupancy rate for Knowledge Industry Complexes in Goyang Special City that started operations between 2023 and 2024 is only between 5% and 47% as of the end of December last year. There are a total of 25 Knowledge Industry Complexes in Goyang, with 11,443 units, but only about 6,404 units are occupied by around 4,320 corporations.
A real estate agent in Deok-eun-dong noted that since Knowledge Industry Complex supply has been abundant in the Deok-eun district since 2020, rental prices have formed at a level that is not high. Although there are many properties where the down payment, which is 10% of the total sale price, is forfeited, it has not translated into actual transactions.
The representative of a brokerage firm in Deok-eun-dong said, "The D Knowledge Industry Complex, which is in its second year of completion, has an occupancy rate of 90%," adding, "Rental prices vary depending on the view of the Han River but for a standard 33㎡ unit, the deposit ranges from 5 million to 6 million won, with monthly rent between 500,000 and 600,000 won."
He noted that the occupancy rate for B Knowledge Industry Complex, which started operations last year, is below 50% and added that someone who purchased a 50㎡ unit in B Knowledge Industry Complex for over 400 million won, including VAT, recently listed it for sale at a price 15 million won lower.
Mr. E, who runs a brokerage firm in the Deok-eun district, stated, "Three to five years ago, especially Knowledge Industry Complexes with a view of the Han River had a premium and became popular as investment products," but also mentioned, "As the real estate boom has subsided, investments that used to require only a 10% down payment now face limited loan amounts of about 50% to 60%."
◆Investment boom in Knowledge Industry Complexes amid low interest rates and lack of housing regulations
Knowledge Industry Complexes refer to buildings where manufacturing, knowledge industries, information and communication industries, and supporting facilities (neighborhood life and retail facilities) can co-exist. During the real estate boom, they were referred to as 'apartment-type factories' and gained attention as alternative investments to apartments.
Unlike apartments, they are free from various real estate-related regulations such as resale restrictions, and they are not counted as dwellings, thus receiving tax benefits such as comprehensive real estate tax and capital gains tax.
From 2020 until early 2023, only a 10% down payment was required for Knowledge Industry Complex sales prices, along with no interest benefits on interim payments, and over 80% of loans were available at the time of final payment.
Initial buyers were able to attach a premium to Knowledge Industry Complexes, gaining considerable price differences. Consequently, developers began competitively constructing Knowledge Industry Complexes in semi-residential or semi-industrial areas.
However, since the second quarter of 2023, loan rates have risen more than 5 percentage points compared to the 2% rate in 2020, causing situations to change rapidly.
As the real estate market entered a downturn and loan rates increased, the demand for investments in Knowledge Industry Complexes began to decline. Since last year, major commercial banks have also reduced the loan limits for Knowledge Industry Complex final payments to 50% to 60% of the selling price.
Currently, Knowledge Industry Complexes are concentrated in the metropolitan area. According to the Korea Industrial Complex Corporation, as of March 31, there are 1,545 Knowledge Industry Complexes nationwide. Among them, approximately 77% (1,190 cases) are located in the metropolitan area. In particular, 714 cases are concentrated in Gyeonggi Province, including Hanam and Goyang. There are 395 and 81 Knowledge Industry Complexes in Seoul and Incheon, respectively.
The volume of transactions and the amount of money involved in Knowledge Industry Complex sales have been decreasing every year. According to Real Estate Planet, the transaction volume of Knowledge Industry Complexes decreased from 8,287 cases in 2021 to 3,395 cases in 2023. The transaction amount also plummeted from 3.4288 trillion won in 2021 to 1.4297 trillion won in 2023.
As of the last quarter of last year, it showed the most sluggish performance in the last five years. The national transaction volume of Knowledge Industry Complexes was 672 cases, and the transaction amount was only 256.9 billion won. This is lower than the 763 cases and 293.7 billion won recorded in the fourth quarter of 2022, when the real estate market entered a downturn due to short-term interest rate hikes.
The number of Knowledge Industry Complex properties that have entered auctions is also on the rise. According to GGAuction, the number of Knowledge Industry Complex auctions, which was 737 in 2021, increased to 1,594 last year.
However, only around 30% of Knowledge Industry Complexes have found new owners in the past year. An analysis by GGAuction of the monthly auction volume and sale rate of Knowledge Industry Complexes in Seoul, Gyeonggi, and Incheon revealed that from January last year to February this year, a total of 279 Knowledge Industry Complex auction properties were listed in the Seoul auction court. Of these, 73 cases were successful bids, accounting for 26.3% of the total, with an average sale rate of 69.3%.
From January of last year to February of this year, a total of 1,403 Knowledge Industry Complex auction properties were listed in auction courts in Gyeonggi Province and Incheon, among which only 373 cases (26.5%) found new owners. The average sale rate was merely 61.2%.
◆Despite serious vacancies in Knowledge Industry Complexes, the number of startups continues to decline
The number of startups, which are primary tenants of Knowledge Industry Complexes, is also decreasing. According to the Ministry of SMEs and Startups, the number of startups has decreased from approximately 1.4846 million in 2020 to around 1.2386 million in 2023.
The CEO of developer F stated, "Even if they receive building permits for Knowledge Industry Complexes, if transportation is not well established, the possibility of unsold units is high, leading many developers to face difficulties in project financing loans." He added, "Even if they have made some progress with sales contracts, concerns persist about contract cancellations and occupancy risks since the supply of Knowledge Industry Complexes exceeds the demand."
The CEO of developer G also stated, "The number of Knowledge Industry Complex properties transitioning into public sales and auctions will likely increase in the future," and urged the government to implement policies that encourage corporations to move into Knowledge Industry Complexes by providing stronger tax benefits and lower-interest financial support to prevent acceleration of vacancies.
According to the Korea Industrial Complex Corporation, as of March 31 of this year, the status of Knowledge Industry Complexes nationwide shows that 877 have been completed, while 223 have not yet started construction. Currently, there are 84 units under construction.