Restrictions on the types of businesses that can move into Knowledge Industry Complexes, where vacancies are piling up, are expected to be eased in May. As the government is pushing a plan to use Knowledge Industry Complexes with high vacancy rates as dwellings, attention is on whether expanding the eligible business types could help Knowledge Industry Complexes shed the stigma of being a "graveyard of vacancies."
According to the Ministry of Land, Infrastructure and Transport and the Ministry of Trade, Industry and Resources on the 13th, easing of the business-type restrictions for occupancy in Knowledge Industry Complexes is expected to kick off in earnest next month. The Ministry of Trade and Industry (MOTI) is pushing to revise the Enforcement Decree of the Industrial Cluster Development and Factory Establishment Act to rationalize siting regulations for industrial complexes. Only industries such as manufacturing, knowledge industries, and information and communications industries can currently move into industrial facilities within Knowledge Industry Complexes, and the plan is to expand the number of eligible business categories from the current 78 to 95.
An official at the Ministry of Trade and Industry (MOTI) said, "The decree revision is expected to be completed in early next month," adding, "We plan to finish it by May at the latest."
Along with this, the government is also pushing to use Knowledge Industry Complexes as quasi-dwellings such as dormitories. The Ministry of Land, Infrastructure and Transport (MOLIT) will purchase Knowledge Industry Complexes, convert them for dwelling use, complete remodeling, and support them as public rental purchase dwellings under the "non-dwelling remodeling purchase-rental dwellings" program. Currently, the Korea Land & Housing Corporation (LH) can purchase only when the building use within a Knowledge Industry Complex is an office facility, but the government plans to revise the Enforcement Decree of the Special Act on Public Housing so that LH can also purchase when the building use within a Knowledge Industry Complex is a factory.
MOTI currently allows officetels only in support facilities within industrial complexes' Knowledge Industry Complexes, but it plans to allow officetels in Knowledge Industry Complexes outside industrial complexes as well. Knowledge Industry Complexes are divided into industrial facilities and support facilities. Industrial facilities can host manufacturing, knowledge and information and communications industries, and venture companies. Support facilities can host neighborhood living facilities such as retail, medical, and educational uses.
These decisions are expected to achieve the policy goals of easing vacancy rates in Knowledge Industry Complexes and expanding dwellings at the same time. One reason vacancy rates are high in Knowledge Industry Complexes, observers have noted, is that eligible business types are limited. In response, the government is both expanding the target business types for occupancy and considering requests from Knowledge Industry Complex allottees to allow vacant space to be used for residential purposes.
Currently, the vacancy problem in Knowledge Industry Complexes is so serious that they have earned the label "graveyard of vacancies." According to the Korea Research Institute for Real Estate Development Industry, the vacancy rate in Knowledge Industry Complexes in the greater Seoul area was 55%. As a result, the nationwide transaction volume of Knowledge Industry Complexes last year was 3,030, and the transaction amount was 1.2827 trillion won, down 22.1% and 23.7%, respectively, from the previous year. The average unsold rate of Knowledge Industry Complexes in the greater Seoul area also reached 40%, and some complexes are being put up for public auction.
However, the Knowledge Industry Complex sector and industry officials said that to ensure the expansion of eligible business types actually leads to lower vacancy rates, an on-site system is needed that allows stakeholders to feel the regulatory easing. They voiced concern that even if regulations are eased at the central government level, on the ground at Knowledge Industry Complexes, occupancy could still be hindered depending on how the management entities interpret the rules.
A representative of a self-storage startup said, "In practice, even when we try to fill vacancies at Knowledge Industry Complex sites, rigid regulations repeatedly derail the effort," adding, "In some cases, even 'venture-certified companies' that the government encourages to move in are blocked from obtaining actual business permits by fragmented rules across management bodies and conservative legal interpretations, creating an absurd situation." The representative added, "Even if a business type is allowed under higher-level laws, each complex's 'basic management plan' and each management entity's criteria differ so widely that the confusion on the ground is enormous."