Radar | Korea | 8 March 2023

2023 Korean Commercial Real Estate

Market Trends
The real estate market continues to thrive amid
market uncertainties
Insights & recommendations

Despite ongoing market uncertainties, the Korean commercial real estate market continues to thrive.
Foreign investors were the first movers to recover from negative investment sentiment and actively re-
entered the market.
We recommend investors standby and be ready to act on good opportunities arising from interest rates
stabilizing. This is expected to be around the middle of the year. Additionally, we recommend investors
consider diversifying their investments across sectors to hedge yield compressions coming from
interest rate hikes and lack of liquidity.
In the Korean office leasing market, the strong influence of the tech sector continued despite an overall
reduction in investment into tech companies and startups. Despite market uncertainties, the landlord-
favoured market situation will continue in 2023 as the demand for space remains strong.
In the long term, we expect new supply to hit the CBD in the form of redevelopment. Additionally,
Seongsu-dong and other new business districts will become beneficiaries of tenants searching for
expansion space with more affordable rents, tenants that are building their own HQs, as well as the
growing trend of setting up satellite offices by conglomerates.

Conservative investment reviews and CBD and GBD expand with planned
rising interest rates redevelopment
• Commercial real estate investment reduction
• CBD: Seoul Station Expansion
• Delayed deals due to market price gap
• GBD: Continued preference for tech companies
• Downward pressure on capital values
• GBD's long-term development plan
• Upward trend in Cap Rates

Awaiting opportunities for foreign Tech tenants’ influence prevails

investors
• Wait-and-see strategy due to lack of liquidity for
Korean institutional investors
• Increase in foreign (Inbound) investment
• Re-inflow of foreign capital to Korea
• Growing impact of Tech industry
• Pent-up demand continues in GBD
• Seongsu-dong area expansion

Logistics investment slows down and
hotel investment jumps
• Profitability concerns rise due to rising
development costs for logistic assets
• Conversion of hotels to offices and retail
surges
Satellite offices and hybrid working
• Expansion of co-working offices
• Increasing satellite offices among
Korea conglomerates
• Hybrid working style becomes popular

ESG commercial real estate investment ESG building management

Standards
• Increase in supply of eco-friendly
• Investment decisions based on ESG standards
green buildings
• Expansion of ESG certification
• Zero Energy Building (ZEB) mandate

2
Interest rate hikes are reshaping the investment market (I)
Conservative investing and tightening reviews

Conservative investment review as Commercial real estate investment

interest rates rise
In January 2023, the Bank of Korea raised the
benchmark interest rate by another 25 basis
points from 3.25% to 3.5%.
Average deposit bank lending rate stood at
5.64% as of November 2022. Commercial real
estate lending rate is above 6%.
Investors are approaching investment
opportunities more cautiously due to concerns
of reduced yields followed by rising interest
rates.
Korean Benchmark Interest Rate
shrinks
In 2022, total investment volume in Korean
commercial real estate (office, logistics, retail,
and hotels) was about KRW 49 trillion. This is a
15% decrease from 2021 when it peaked at total
investment volume of KRW 57 trillion.
All types of commercial real estate investment
volume decreased compared to 2021 except for
hotels.
Korea Real Estate Investment (KRW Trillion)

4% 57
3.50% 60
3.25% 49
3% 50 42
2.50%
2.25% 40 32
31
1.75%
30
20
10
0
22.05 22.07 22.08 22.10 22.11 23.01 23 E 2018 2019 2020 2021 2022

Source: Bank of Korea (BOK) Source: Colliers, RCA, Note: Survey data includes all property types.

The Bank of Korea Bank Lending Rate Korean Real Estate Investment by Sector
(KRW Trillion)

5.64 2018 2019 2020 2021 2022

5.26
4.71 30
4.52 26
4.21
3.9 25
3.68 21
20
15
15 12.2 11.7
11
10
6
4
5
0
2022/05 2022/06 2022/07 2022/08 2022/09 2022/10 2022/11 Office Industrial Retail Hotel

Source: Bank of Korea (BOK) Source: Colliers, RCA

3
Interest rate hikes are reshaping the investment market (II)
Widening price gap between buyers and sellers

Closing delays due to price gap between Downward pressure on capital values
buyers and sellers Assets under funds and REITs that failed to
The price gap between buyers and sellers is refinance loans are expected to appear in the
widening. Continued landlord-favored office market. In this regard, sellers may be under
leasing market is pushing up rent levels, while more pressure to adjust their selling price.
increasing interest rates have made investment The price gap between buyers and sellers is
activities more conservative. widening, and as of the date of publication of
As buyers are waiting for sales prices to fall and this report, there are no examples of assets
sellers are unwilling to lower their asking prices, being sold at a discount. In the future though,
we view that either investors are withdrawing we do expect office prices to face downward
from participating deals or sellers are delaying pressure.
deals. In fact, several preferred bidders for assets that
Investment in prime offices are expected were put on the market last year which have not
yet closed, are requesting agreed-prices to be
to decrease renegotiated.
The overall Korean prime office investment
Cap Rate (NOI/Value) Increase
volume in 2022 showed similar levels to that of
year 2021: KRW13.6 trillion (2022). KRW13.2 Office real estate Cap Rate is expected to rise in
trillion (2021). volume in 2023 for following two reasons. First,
continued landlord-favoured market will uphold
The prime office investment volume in 2022 was
rents and NOI levels. Second, sales price is likely
able to record similar levels during unfavourable
to fall due to lack of liquidity in the market.
market conditions in Q4 2022 due to pre-
purchased development deals, investment deals Korean office Cap Rate is at the 3.5%~4.5% level,
for major REITs, and the timing of closing. and the spread between the 5-year KTB yield in
Q4 2022 was 27bps.
The 2023 prime office investment volume by
domestic institutions will decrease until the first
half of the year because interest rates are
expected to stabilize in the second half of 2023.

Office Transaction Volume & Capital Value Prime Office Cap Rate
Spread Average Cap Rate 5 year Treasary bond
16 30
Capital Value KRW/PY (Million)

14
25 1000 5.00%
Volume KRW Trillion

12 4.50%
20 800 4.00%
10
600 3.50%
8 15 3.00%
400 2.50%
6 2.00%
10
200 1.50%
4
5 0 1.00%
2 0.50%
- - -200 0.00%
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22

2018 2019 2020 2021 2022 2023E

Source: Colliers Source: Colliers. Note: 1pyeong = 3.3 sq m

4
Interest rate hikes are reshaping the investment market (III)
Foreign investors are expected to actively participate investment
Wait-and-see approach due to lack of
liquidity in Korean institutions
Korean investors have led the Korean
commercial real estate investment market for
past few years as they have invested in more
than 90% of transactions. However, Korean
institutional investments decreased due to rising
interest rates. This caused investors to place a
higher preference in what are perceived to be
“ f ” h bonds. Korean institutional
investors will wait for investment opportunities
until after H1 2023 due to rising interest rates.
Expecting more asset purchases by
foreign institutions
On the other hand, foreign funds are surveying
investment opportunities in Korea with increased
capital backed by the stronger USD against KRW.
The Korean market is deemed as a relatively
stable investment destination when compared to
that of China or other emerging markets for
funds targeting Asia. Especially in the office
sector where the fundamentals of demand,
supply and vacancy remain very strong.
Furthermore, foreign funds can secure yields
through equity investment on blue-chip assets.
This is because foreign institutions with much
capital can lower the loan-to-value (LTV) ratio by
increasing equity amid times of soaring interest
rates.
Investor Type in the Korean Real Estate Market
Cross-Border
100.0%
80.0%
60.0%
40.0%
20.0%
25.3% 14.5%
0.0%
2016 2017
Source :Colliers, RCA. Note: Data is for all property types.
Increasing foreign investments
In 2022, foreign investors accounted for 12% of
the total Korean commercial real estate
investment market, a figure that doubled from
6.7% in 2021.
Foreign funds actively invested in commercial
real estate in Q4 2022 where most of the
domestic institutions were reluctant to invest due
to market uncertainties. For instance, Keppel
Asset Management, the Singaporean investor,
purchased Samhwan Building for KRW 223.2
billion. Keppel Asset Management plans to
increase value of the building through value-add
strategy. Investment opportunities that fit the
value-add strategy profile are expected to
become more popular among foreign investors
in the future. In addition, BentallGreenOak
purchased GB1 and GB2 building in Pangyo
through beneficiary certificate trading.
It is said that various foreign private equity funds
are looking for various commercial real estate
investment opportunities in the Korean market.
Moreover, loan products targeting developers
who are having difficulties in raising funds due to
rising real estate PF risks are also becoming one
of the investment options for foreign funds.
In the future, foreign institutions are more likely
to actively participate in investment activities
than Korean institutional investors with their
advantageous position.
Institutional REIT/Listed Private User/Other
22.2%
13.0% 8.6% 6.7% 12.1%
2018 2019 2020 2021 2022
5
Investment slows down in logistics market
Conservative review and investing activities
Conservative investment review due to
market uncertainty
Investors are becoming more conservative in
their decision-making due ongoing market
uncertainties: oversupply of logistics, e-
commerce growth slowdown, and lack of
liquidity followed by rising interest rates.
As market conditions for logistic centers have
worsened mainly due to supply spikes and rising
interest rates, uncertainty overshadows future
investments in logistics centers.
Investment reduction in logistics
The total investment volume in logistics centers
in the metropolitan area in 2022 was KRW 4.2
trillion. Investment volume has decreased more
than 70% when compared to KRW 7.2 trillion in
2021. However, total investment volume of
logistics in Korea did not drop significantly when
compared to 2021. Total investment volume in
2022 was KRW 11.7 trillion and was KRW 12
trillion in 2021. Logistics sector showed much
resilience compared to investment performance
of both office and retail.
Less investment activitiy in the logistics market is
projected in 2023 but will continue to stay as one
of the most sought-after assets for investors, as
long as they focus on good locations.
Korea Logistics Investment (KRW Trillion)
14 12.2
11.7
12
10
8 6.5
6 4.4
3.3
4 2
2 1
0 0
2018 2019 2020 2021 2022
Source: Colliers
Rising concerns regarding investment
yield reduction due to cost increase
There is much concern about decreasing
investment yields for logistics centers due to
rising construction cost and increasing financing
cost.
For instance, some logistics center development
sites are being put on hold due to financing
issues as banks are unwilling to lend capital
where there is a perceived high real estate PF
risk.
On the other hand, blue-chip sites that failed to
raise funds through PF are expected to gain
attention from foreign PE funds and foreign
investors.
Cap Rate (NOI/Value) Rise
The Cap Rate of logistics centers are projected to
increase as rent growth will be limited due to
interest hikes and rising vacancy rates.
As logistics market is sensitive to macroeconomic
changes and uncertainty grows, logistics centers
will face a difficult time finding tenants which will
cause upward pressure on Cap Rates eventually.
Cap Rate level for logistics centers is projected at
5%~6%.
Metropolitan Area Logistics Investment Scale
8 10
Capital Value KRW/PY (Million)
7 9
Transaction Volume KRW (Trillion)
8
6
7
5 6
4 5
4
3
3
2
1
0
2018 2019 2020 2021 2022
Source: Colliers
6
Hotel investment increases
Growing investment in converting hotels into offices and residences

Increased hotel investment Hotel conversion development plan

Several hotel sites are planned for large-scale re-
Korea's total hotel investment volume in 2022
development converting from hotel to office,
reached the highest at KRW 5.8 trillion.
residential, and commercial complexes.
The share of hotel investment volume in total
For instance, IGIS AMC acquired the Millennium
Korean commercial real estate investment also
Hilton Hotel near Namsan, Seoul, for KRW 1.1
reached double digits, 12% for the first time.
trillion in Q4 2021 to develop a landmark office
Unlike office and logistics investments, which and hotel complex by 2027 (total floor area
declined due to rising interest rates, hotels of ​ bo 260,000㎡).
investments increased.
Furthermore, a consortium of Hyundai E&C,
This is because investors were seeking profits Meritz Financial Group, and Mastern Investment
from redeveloping hotels to other types of asset Management plans to build a 31-floor building
rather than operating the hotels. Redeveloping including offices, hotel, and retail on the Le
hotels in profitable locations with high floor ratio Meridien site in Gangnam.
was the most popular investment. In particular,
Lastly, Seocho Sheraton Palace Gangnam is
the hotels located in GBD area were popular for
scheduled to be redeveloped into an office or
redevelopment into high-end officetels.
residential/commercial complex.
Construction companies and developers actively
As there is a shortage of office development sites
acquired hotels as there were limited
in the GBD, cases of changing the use of hotels
development sites for offices or residences in
to offices are expected to increase.
Seoul which are more lucrative.

Korean Real Estate Investment Distribution Hotel Conversion Plan

by Sector
Property Conversion Plan
Office Industrial Retail Hotel
Office, Hotel
100% Millennium Hilton Seoul
7% 8% 5% 8% 12% Reconstruction
90% Office, Hotel
Le Méridien
80% 24%
29% 34% 26% 22% Reconstruction
70% Hotel Prima Seoul Residential
60% 11%
14% 22% 24% Sheraton Seoul Palace
50% 16% Residential
Gangnam Hotel
40% Office, Hotel
GLAD LIVE Gangnam
30% 58% Reconstruction
49% 45% 45% 43%
20% Itaewon Crown Hotel Residential
10%
Aventree Hotel Officetel
0%
2018 2019 2020 2021 2022
Source: Colliers, RCA Source: Colliers, RCA

7
ESG standards and investment decisions
The importance of ESG standards rises in investment decision making

Expansion of making investment Expansion of ESG certification for Korean

decisions based on ESG standards real estate assets
Increasing number of global institutions are As more global pension funds and asset
making investment decisions based on ESG management companies make investment
(Environmental, Social, Governance) scores. decisions in real estate based on ESG scores,
numerous Korean real estate companies are
California Public Employees' Pension System
actively seeking green building certification for
(CalPERS) and Dutch Civil Servants Pension Fund
their assets.
(ABP) consider adopting environmental factors
such as energy efficiency, energy consumption, Notable green building certifications include
and carbon emissions when making investment both GRESB (Global Real Asset Sustainability
decisions for alternative investments such as real Benchmark) and LEED (Leadership in Energy and
estates. Environmental Design). GRESB comprehensively
evaluates real estate and its management
In case of overseas investors, there is increasing
company for their impact on the environment,
number of cases where ESG conditions are put
society, and relationship with stakeholders. IGIS
forward in blind fund agreements when
Asset Management and KORAMCO Asset Trust
investing in real estate in Korea. The National
have obtained GRESB certification. On the other
Pension Service (NPS) introduced a new 'negative
hand, LEED certifications are only for actual real
screening' strategy that prohibits investment in
estate assets. Centropolis, Gangnam Finance
“ -eco-f d y” d o b f om
Center (GFC), Seoul Square, Autoway Tower, and
an ESG standpoint.
Majestar City Tower 2 have acquired the highest
As the new international climate system kicks off level of LEED, Platinum.
with 2021 Paris Agreement on Climate Change,
N v ’ D C v d LEED P m
major countries have declared carbon-neutral
recently, it shows that Korean ESG certification is
targets. South Korea has declared to achieve
expanding not only in office buildings but also in
carbon emission target by 2050.
logistics and data centers.
In the future, ESG is expected to be an important
As more investors consider ESG as one of the
evaluation factor not only in real estate
investment standards, ESG certification is
investments but also in REITs. The more eco-
expected to spread widely in the Korean
friendly real estate is the easier to receive
commercial real estate market in near future.
funding from institutional investors, and the
value of the building will also increase as well.

ESG Certification Activities by Investors in Korea

Investor Note
• 5 stars at GRESB 2022
IGIS Asset Management
• Acquisition of LEED for 9 assets under management
• 5 stars at GRESB 2022 Acquired LEED Platinum for Majestar City Tower 2 in
KORAMCO Asset Trust
operation
• 5 stars at GRESB 2022 Reflection of ESG factors in the design, construction, and
ESR Kendall Square
operation process of the logistics center
D&D Platform REITs • Semicolon Mullae Building, LEED Platinum Acquisition
Shinhan Alpha REITs • Promote LEED certification for more than 50% of holdings within 3 years
Source: Colliers

8
Influence of tech companies continues
Demand maintained despite investment reductions

Decline in venture business investment Tech industry pent-up demand

According to the Ministry of SMEs and Startups,
the amount of venture investment in 2022 was
KRW 6,764 billion which decreased 11.9% YoY.
Investments in tech companies sharply declined
starting from H2 2022, and notable companies
such as Market Kurly and Oasis had to delay their
IPOs.
Despite the reduction in investment caused by
elevated interest rates, the number of startups
h ’ d wo h mo h KRW 1 o startups are likely to be extended due to soaring
increased 7% YoY.
Tech tenant continues to rise
About 13% of Grade A offices in Seoul are
occupied by tech tenants. In particular in the GBD,
where tech tenants account for 22% of the office
area. Despite a reduction in the amount of
investment in tech companies, tech tenants are
expected to continue to be a major force and
occupy a large proportion of office space in Seoul.
This is because financial sector and
manufacturing companies are trying to expand
their current business by transforming into tech-
friendly companies.
V y ‘ h omp y f vo d’
Gangnam area was recorded at 0.8% as of Q4
2022, while landlord favored market continued.
Tech companies that had plan to move out from
shared office followed by their expansion were
not able to relocate as there were no available
leasing options.
While new demand from startups has decreased,
existing co-working office agreements by
rent levels in GBD and lack of alternative office
space.
Rise in interior costs from inflation is another
burden for companies that were planning to
grow out of coworking offices and find new
office buildings. Hence, companies are likely to
extend their coworking office contract until they
find appropriate relocation opportunity instead
of paying higher rent and deposits.
Demand in the GBD area is expected to be
similar despite investment reductions in tech
companies followed by pent-up demand for
office relocations.

Major Tech tenants leasing cases in GBD

Grade A Office Tenant Composition in Seoul
(2021-2022)
Area
Telecom, Media,
Construction &
Tenant Building
Communication, 3.3%
Engineering, Co-work space,
2.9%
(㎡ )
4.6%
Krafton Centerfield 27,000
Banking & Molocco Centerfield 7,300
Governmental& Finance &
Non-Profit, 6.1% Insurance, Amazon Web Services Centerfield 6,500
33.7% Npixel Centerfield 1,798
Others, 7.0%
Danggeun Market Kyobo Tower 9,600
Professional Ably Kyobo Tower 3,200
Services, 12.6% Manufacturing & Netmarble Posco Tower 3,500
Energy, 17.9%
IT, Software,
Enterprise blockchain Samsung Daechi 2,700
Technology,
Solution, 12.8% Imweb V-plex 4,200

Source: Colliers. 2022 Source: Colliers

9
Expansion of GBD area
Expanding the prime office market in Seocho and Gangnam station

Expansion of GBD area Long-term development plan for Gangnam area

Tiger 318 building built near Gangnam Station is

Global Business
the only Grade A office to come to the market in center

the GBD in 2023. Grade A office supply in GBD is Samsung Stn.

limited due to lack of development sites.

However, things are about to change as large- Yeoksam Stn.
scale development projects from Teheran-ro to Lotte Chilsung
Site Gangnam Stn.
Seocho station are planned to meet continuously Seocho Info
Seocho
site Gyodae Stn. Kolon
growing GBD office demand by tech companies.
Seocho Stn.
Long-term development plan centering around
Gangnam Station will supply new office in
Gangnam area.
Possible development sites adjacent to Gangnam In addition, MDM, Korean real estate developer, is
Station are Lotte Chilsung site, Seocho Kolon planning to create an office town near Seocho
Sporex site, and Lion Missing site, which are Station. MDM Group formed a consortium with
likely to be redeveloped into large-scale business Shinhan Bank and IGIS Asset Management to
complexes. purchase the site for KRW 1.96 trillion.
Alongside with Samsung Town, a business When completed, eco-friendly high-tech industrial
complex of about 86,000㎡ will be formed near town with offices, hotels, and art galleries will be
Gangnam Station, which is larger than area formulated on 96,797㎡ site.
of ​ h GBC (G ob B C ) h
In the long term, major prime office supply area in
currently under construction in Samsung-dong
GBD will move from Samsung station (near
(79,000㎡ ).
Teheran Valley) to Gangnam station and Seocho
station.

Long-term Development Plan in Gangnam Area

Project Note
• Seocho Station, Gyodae Station, and Gangnam Station area of
Lotte Chilsung Site 590,000㎡ district unit plan is established
• 42,312㎡ site with 47 floors of office, hotel, cultural facilities
development plan

Seocho Kolon Sporex Site • 8,900㎡ site with 25-floors mixed-use facility development plan

• On a site of 96,797㎡ , IGIS Asset Management and real estate

Seocho Information Agency site
Development
Global Business Center (GBC)
Source: Colliers
developer MDM plan to turn it into a large office town
• Apple Park benchmark in Silicon Valley, USA
• Hyundai GBC Center
• Planned to be developed as business facilities, accommodations,
cultural facilities, etc.

10
Expansion of new office sites
Rise of Seongsu-dong area

Rise of the Seongsu-dong area

The Seongsu-dong area is emerging as an
alternative option for tenants who were not able Major submarkets
to secure office spaces in the GBD. with tech clusters

The Seongsu-dong area has an upper hand

when it comes to accessibility and public
transportation. It is not only close to Gangnam
area (2 km away) but also located near three Hongdae Seongsu-dong
subway stations (Seongsu stn, Ttukseom stn and CBD
Seoul Forest stn) which makes it more accessible YBD
from the major business districts in Seoul. GBD
Moreover, the Seongsu-dong area has lower Gwacheon
rent than that of GBD which makes it highly Guro
Guro
attractive to startups with tight budgets.
Lastly, the Seongsu-dong area is being Pangyo & Bundang
compared to next GBD as increasing number of
pop-up stores of tech companies, entertainment
business, and various retailers are actively
established.
Due to its increasing popularity, Seongsu-dong
has become one of the target places for
In the long term, Seongsu-dong area is
corporate investment. Previously, Seongsu-dong
expected to be developed as an independent
was mostly comprised of small to medium sized
buildings. However, with upcoming scheduled business district favored by tech companies
corporate investment, increasing number of followed by Gangnam, Pangyo, and Bundang
medium to large-scale buildings are planned. w h d v opm of ‘S o IT I d
D b o D v opm D ’ ​p d
For instance, mid- to large-sized office buildings
Sampyo ready-mixed concrete factory site
of Krafton HQ, Musinsa HQ, and Gentle Monster
HQ are all scheduled to be in Seongsu-dong area. development.

Major Relocation Plans in Seongsu-dong (expected)

Tenant Building From Year Note
Additional Seongsu-
Spark Plus
Musinsa GBD 2020 dong office building
Seongsu 2
to be built
Hyundai Glovis D-Tower Forest GBD 2021
SM
D-Tower Forest GBD 2021
entertainment
Kidari Studio Corner 50 Other 2022 Consolidated
Gentle Monster Planned headquarter Other 2024
Purchase of E-Mart
Krafton Planned headquarter Pangyo 2026
Seongsu headquarter
Source: Colliers

11
Expansion of CBD office market
Expanding CBD area with new supply

Expansion of CBD office market

Seoul Station and Seosomun Development Plan
Currently, most prime buildings in the CBD are Gwanghwamun Stn.
concentrated near Gwanghwamun Station.
In the future, the popularity and status of the
CBD are likely to increase due to abundant,
newly planned office supply and redevelopment
projects in Seosomun district and around Seoul
Station. City Hall Stn.

New office supply is planned in Seosomun Seosomun

10 District
Seosomun
district 10, 11, and 12 through districts Samsung Life
11,12 District

integration. In addition, Samsung Life Seosomun Insurance

Building is scheduled to be reconstructed by

Bongnae1
combining two office buildings and concert hall. District

Meanwhile, Meritz Fire & Marine Insurance is

Seoul Station Seoul Stn.
planning to build 20 floor office building in (North)
Millennium
Bongnae District 1 near Seoul Station. Hilton

The railway site (29,000㎡) near Seoul Station will

be developed with five buildings of 38-floors
building above ground and 6 floors under
ground. Total floor area is expected to be
350,000㎡ which will be comprised of exhibition
centers, hotels, and business complexes.

Seoul Station and Seosomun Development Plan

Building Area (㎡) Note

Bongnae1 District • To be used as a combined Meritz Fire office building

40,279
(Meritz) • Partial area can be rented outside
Seosomun 10 District (Donghwa)
39,759 • Planning for development

Seosomun 11, 12 District

121,997
(JoongAng)
Seodaemun 1, 2 District (Hoam)
Seoul Station (North)
Millennium Hilton Development
Source: Colliers
• Planning for development
• Samsung Life Insurance plans to rebuild
NA
• 2 office buildings and concert hall to be supplied
• Developed by Hanwha
NA • Planned to be developed into offices, hotels, international
MICE, etc.
• Aegis Hilton Hotel will be developed after purchase
NA
• Combined office, hotel and retail development

12
Expansion of Co-working office space
Expansion of co-working office space and hybrid working
Expansion of new regions for co-working
operators
Contrary to concerns that expansion of co-
working offices will slow down followed by
slowdown in startup expansion, number of co-
working office branches continues to expand.
International co-working companies such as
WeWork, Regus, JustCo, and The Executive
Centre (TEC), as well as Korean companies like
Fast Five and Spark Plus are the most active
business operators operating shared offices in
Grade A and B offices in major areas of Seoul.
In the meantime, co-working operators who
have actively increased branches in major
districts are expanding location of co-working
offices outside of major districts as available
area for lease in major districts has decreased.
For instance, Fast Five is expanding its business
to Guro, Yongsan, Hannam, and Sadang.
Moreover, Spark Plus opened its third store in
Bundang and is preparing to open a large-scale
co-working office in COEX.
Co-working space operators, who had signed
agreements when it was a tenant-favoured
market, will no longer offer benefits to tenants
such as rent free in the three major business
districts as the market situation has changed to
be more landlord-favourable.
In addition, co-working space operators are
expanding beyond the traditional areas as rents
continue to rise and it is getting more difficult to
find expansion options in the Gangnam area,
which is the most preferred area by tech
companies.
Number of Major Coworking Operators
Company Name Number Centers
Fast Five 41
Spark Plus 35
WeWork 20
IWG (Regus and Spaces2)
11
JustCo 5
The Executive Center 6 Despite the reduction of the hybrid working style
Source: Colliers, March. 2023
Satellite offices continues to expand
As hybrid working styles have become more
common, even Korean conglomerates in
traditional business sectors such as electronics
and steel making have increased the numbers of
satellite offices.
For example, Samsung Electronics began
operating two satellite offices and four
autonomous work zones. Moreover, Hyundai
Motor Company is operating 'H-Wo k o ’,
network of satellite offices in Jongno, Yongsan,
Incheon, and Anyang. LG CNS is using 48 satellite
offices through co-working office operators'
branches. SK Telecom is the most active among
the conglomerates in expanding satellite offices
by acquiring shares of Spark Plus.
As the number of cases where co-working offices
are used as satellite offices for conglomerates
increases, co-working operators are shifting their
marketing targets from small startups to large
corporations and focusing on enterprise sales.
Expansion of hybrid working method
Although some companies are reducing working
from home policies due to economic uncertainty,
it seems that hybrid working style will become
more popular in the future.
Recently, development pace of full mobile work
system is being adjusted since large tech
companies are reducing proportion of work
from home policies.
I f ,K k oh y h d ‘100%
wo k f om hom ’ po y o ‘Wo k F om Off
R omm d d’ po y Mo ov , m jo m
companies such as NC soft, Nexon, and
Netmarble have also changed their work policies
recommending employees to return back to
office.
On the other hand, Korean platform companies
such as Naver, Danggeun Market, and Baedal
Minjok, are continuing to uphold hybrid working
style.
in some companies, multiple companies are
maintaining hybrid working style where they
recommend employees work from the office for
2-3 days and the rest work from home. 13
ESG Real Estate Management
Mandatory Zero-Energy-Building (ZEB) certification
ESG 전략 지속

ESG Increases in certified eco-friendly Zero-Energy-Building (ZEB) certification

office buildings
With the growing popularity of ESG management,
the number of eco-friendly office buildings that
are focused on recycling, energy efficiency and
reducing greenhouse gas emissions is increasing.
Eco-friendly office building transformation is
mainly led by Korean conglomerates, and the
number of eco-friendly remodeling increased as
offices meeting ESG standards are preferred.
Moreover, there are efforts to reduce carbon
dioxide emissions from office building
management and operations.
In December 2022, EU Commission announced
Greenhouse Gas (GHG) net-zero policy on all new
buildings by 2030 and carbon-free policy by 2050.
Korean government has been implementing the
Zero-Energy-Building (ZEB) certification since
2017 to increase building energy efficiency and
reduce GHG.
Starting from January 2023, ZEB certification will
be mandatory for all of public buildings with
floor area of 500 sqm or more and all private
buildings with total floor area of 100,000 sqm or
more.
Beginning of 2025, ZEB certification will be
mandatory for all newly constructed
buildings. In this regard, offices that are
scheduled for completion in 2025 will have to
acquire ZEB certification upon completion. ZEB
certified buildings will become the new standard.
In addition, the leasing market will also have to
begin preparing for eco-friendly buildings
management and operation strategies as more
companies prefer to rent eco-friendly buildings.

Eco-friendly and ESG Certified Major Office Buildings in Korea

Building Note
• Korea Energy Efficiency Rating Certification Class 1
Amore Pacific Headquarters
• LEED Gold
• LEED Platinum
LG Science Park
• Establishment of building energy management system

• Building Energy Efficiency Class 1

Hanwha Headquarters
• Installation of photovoltaic power generation system (BIPV)

Kolon One & Only Tower • LEED Platinum

• Domestic green building certification(G-SEED) Best Grade

GS Gran Seoul Building
• LEED Gold
• Green Building Excellent, Building Energy Efficiency Grade 1
KT Gwanghwamun Building East
• LEED Gold
Lotte World Tower • LEED Gold
NAVER Green Factory • LEED Platinum

Naver 1784 office building • LEED Platinum

Source: Colliers

14
For further information, please contact:
Judy Jang Robert Wilkinson
Director | Research | Korea Managing Director | Korea
+82 2 6325 1918 +82 2 6325 1901
Judy.Jang@colliers.com Robert.Wilkinson@colliers.com

Sungwook Cho
Executive Director | Capital
Markets and Investment Services|
Korea
+82 2 6325 1904
sungwook.cho@colliers.com

Jay Cho
Senior Director | Office &
Industrial Services| Korea
+82 2 6325 1905
Jay.Cho@colliers.com

Jeanne Choi
Director | Valuation & Advisory
Services| Korea
+82 2 6325 1903
Jeanne.Choi@colliers.com

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