Third-quarter sales of knowledge industry centers across South Korea hit a five-year low in both transaction volume and value, as demand failed to keep pace with the surge in supply that followed the COVID-19 pandemic.
According to a report released Thursday by commercial real estate platform Budongsan Planet, knowledge industry center transactions totaled 520 deals worth 208.9 billion won ($145 million) in the third quarter — the lowest levels since 2021. Compared to the second quarter, which recorded 814 transactions worth 349.2 billion won, volume dropped 36.1% and value fell 40.2%. Year-on-year, transactions plunged 47.3% from 987 deals and value tumbled 53.5% from 449.3 billion won.
The Seoul metropolitan area, which accounts for 88.1% of total transactions, saw 458 deals worth 188.3 billion won in the third quarter, down 36.8% and 41.7% respectively from the previous quarter. The decline was even more pronounced compared to the same period last year, when 882 transactions totaling 409.5 billion won were recorded — representing drops of 48.1% in volume and 54.0% in value.
Knowledge industry centers are buildings of three or more floors that can house manufacturing, knowledge-based industries, information and communications businesses, and their support facilities. These properties gained popularity as income-generating real estate alternatives when various regulations were focused on residential properties during the low interest rate era when real estate prices were rising. However, they have since become white elephants that struggle to find buyers even at negative premiums as demand has dried up.
Despite declining transaction volumes, average prices per 3.3 square meters of exclusive-use area increased. The nationwide average price reached 16.29 million won per 3.3 square meters in the third quarter, up 3.8% from 15.69 million won in the previous quarter. This marks the highest level since the third quarter of 2024, when prices stood at 18.79 million won. In the Seoul metropolitan area, prices rose 3.7% from 16.19 million won to 16.79 million won, while non-metropolitan areas saw an 8.2% increase from 11.65 million won to 12.61 million won.
"The knowledge industry center market saw declines in both transaction volume and value compared to the second quarter as demand weakened amid accumulated supply pressure," said Jung Su-min, CEO of Budongsan Planet. "Given that improving market conditions will not be easy, it is difficult to expect a clear recovery in the short term."
The auction market also shows no signs of recovery in demand for knowledge industry centers. According to auction data specialist GG Auction, the number of knowledge industry center properties going to auction has increased for three consecutive years since 2022. While 403 properties went to auction in 2022, the number rose to 688 in 2023 and more than doubled to 1,564 last year. As of the end of September this year, 2,593 knowledge industry center properties were listed in the auction market.
As listings increase, auction sale rates continue to fall. The successful bid rate, which stood at 88.7% in 2022, dropped to 71.2% in 2023, then to 65.8% last year, and has been cut nearly in half to 57.7% this year.
