[Edaily Marketin KIM SUNG-SOO Reporter] Transaction volume for knowledge-industry centers rebounded in the second quarter of this year. However, this is interpreted less as a broad market recovery and more as a sign that a “separation of the wheat from the chaff” is underway—where buying interest is concentrated on high-quality assets whose prices have adjusted sufficiently, while distressed assets are being sold off at auction.

In particular, there have been no new pre-sales for three consecutive quarters. Going forward, the competitiveness of the knowledge industry center market is expected to hinge not on pre-sale rates, but on “operational capabilities”—such as actual corporate occupancy rates, rent levels, management fees, and the speed at which vacancies are filled.
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224 Transactions in Q2 of This Year… “Highest” Since Q3 2022

According to an analysis by R&Partners, the operator of “Knowledge Industry Center 114,” citing actual transaction price data from the Ministry of Land, Infrastructure and Transport, the volume of transactions for knowledge industry centers nationwide in

the second quarter of this year

was

the highest since the third quarter of 2022

.

The number of transactions during this period totaled 1,224, marking a 17.4% increase from the previous quarter and an 18.1% increase from the same period last year.

The total transaction value also rose by 29.2% from the previous quarter to 553.9 billion won, while the total transaction area increased by 25.7% to 131,974 square meters. The average transaction price was 13.88 million won per 3.3 square meters (pyeong), up 2.8% from the previous quarter and 2.3% from the same period last year.

On the surface, it appears that a favorable trend is blowing through the transaction market. However, a closer look at the nature of this increase tells a different story.

Medium- to large-sized properties with an exclusive area of 100 square meters or more accounted for only 38% of the total number of transactions but represented 57% of the total transaction value. Corporate purchases also accounted for 70% of the total. This increase in transactions reflects a combination of purchases by end-user companies, asset transfers between corporations, and the liquidation of remaining inventory by developers and trust companies.

There were also 18 bulk transactions in which entire floors were purchased. At “Eugene Tower Techno Valley 3,” nine units were sold for 25.5 billion won, and at “JS The Sky Tower Phase 3,” 43 units were sold for 17.7 billion won.

However, given that a significant number of these transactions were direct deals, caution is needed before interpreting them as a sign of a general market price recovery.

Number of Auctions Rises for Five Consecutive Quarters… Success Rate Hits ‘All-Time Low’

While the transaction market appears to be recovering, the auction market is sending the exact opposite signal. In the second quarter of this year, the number of court auctions for knowledge industry centers in the Seoul metropolitan area reached 1,530, a 24% increase from the previous quarter’s 1,233.

This marks the fifth consecutive quarter of growth and is 2.6 times the 594 cases recorded in the same quarter last year.

Even more striking is the winning bid rate. In the second quarter of this year, the winning bid rate stood at 51.5%, marking the lowest level since 2020. This indicates an increase in cases where knowledge-industry centers are sold at auction for about half their appraised value.

Regional disparities were also pronounced. Gyeonggi Province accounted for 1,084 auction cases, representing 71% of the total for the Seoul Metropolitan Area. The average winning bid rate in Gyeonggi Province was 48.9%, lower than that of Seoul (60.2%) and Incheon (56.7%).

In particular, newly constructed knowledge industry centers on the outskirts—such as Godeok in Pyeongtaek, Yangchon in Gimpo, and Geomdan in Incheon—are bearing the brunt of price adjustments. In fact, the 10 lowest-priced actual transactions in the second quarter of this year were all properties sold at court auctions, concentrated in newly built facilities on the outskirts of the Seoul metropolitan area. Conversely, the highest-priced actual transactions were concentrated in Seongsu-dong, Seongdong-gu.

This marks the full-scale onset of “polarization,” where prices vary significantly even among similar knowledge-industry centers depending on location and asset competitiveness.

On the supply side, market changes have already begun. Nationwide, there have been no new pre-sales of knowledge industry centers for three consecutive quarters since the fourth quarter of last year. This is because the combination of a credit crunch in the project financing (PF) market, rising construction costs, and the burden of unsold units has made it difficult to ensure the viability of new projects.

With new project launches on hold, the medium- to long-term supply pipeline is also shrinking rapidly. Although seven sites totaling 617,000 square meters were completed in the second quarter of this year, analysts view this as part of a trend where supply is declining after peaking in 2024–2025.

However, a decline in supply does not immediately resolve issues with existing assets. There have been a series of cases where companies have struggled to pay the final balance immediately after completion, as financial institutions have applied conservative collateral valuations and loan-to-value (LTV) ratios.

“Occupancy Rates Over Pre-Sale Rates”… Financial Sector Prioritizes ‘Recovery’ Over ‘New Supply’

Market evaluation criteria are also shifting. In the past, high

pre-sale

rates were the benchmark for a project’s success, but now actual corporate occupancy rates, rental levels, competitive management fees, and the speed at which vacancies are filled have become key indicators determining asset value.

Prolonged vacancies are expanding beyond real estate issues to become financial problems. In the outskirts of the Seoul metropolitan area and regions with large-scale supply, prolonged vacancies cause rents to fall, which in turn leads to non-payment of final installments and delays in project financing (PF) repayments.

Ultimately, from the perspective of financial institutions, the structure leaves them with no choice but to adopt strategies that increase the likelihood of recovering their investments—such as refinancing, stabilizing rents, selling the properties, or conducting public auctions—rather than injecting additional capital.

Policy directions are also shifting. In areas such as the Magok Industrial Complex in Seoul, as well as the districts of Guro, Geumcheon, and Yeongdeungpo, the range of eligible industries for occupancy in knowledge-based industrial centers is being expanded. These areas are broadening the scope of permitted businesses to include construction, finance and insurance, legal and tax services, information and communications engineering, and OEM (original equipment manufacturer) manufacturing.

The goal is to broaden the target market while continuing to utilize existing buildings as-is.

Plans to convert vacant knowledge industry centers into residential facilities, such as officetels, are also under discussion. However, experts assess that this is unlikely to serve as a universal solution for the entire market, as there are many hurdles to overcome—including the consent of unit owners, compliance with parking, daylighting, and fire safety standards, zoning restrictions, and remodeling costs—before a change of use can actually take place.

“Restructuring,” Not “Recovery,” in the Second Half… “Only Good Assets Will Survive”

Accordingly, the key theme for the knowledge industry center market in the second half of this year is expected to be “restructuring” rather than “reco

very.”

It is highly likely that the price gap between sellers and buyers will narrow through urgent sales, public auctions, and discounted sales. Furthermore, for projects with unsold units after completion, normalizing operations—through measures such as boosting leasing activity and attracting businesses—is expected to be more important than simply offering discounted sales.

Ultimately, the question of “what kind of knowledge industry center it is” is expected to become more important than simply “whether it is a knowledge industry center or not.” This means that the competitiveness of individual assets will be more important than the product category itself.

Demand is likely to concentrate on assets located near transit hubs and industrial clusters, with low maintenance fees, good parking facilities, and high utility for large floor areas, as well as those capable of accommodating a diverse range of business types. On the other hand, assets with weaknesses such as peripheral locations, oversupply, high maintenance fees, and insufficient tenant demand are unlikely to avoid further price adjustments.

An official from the financial investment industry stated, “The changes in the knowledge-based industrial center market in the second half of this year are clear,” adding, “Vacancy rates are normalizing, pre-sales are shifting toward operational use, investment demand is turning into actual demand, and uniform asset values are giving way to polarization based on individual assets.”

He continued, “It is still too early to view the rebound in transaction volume in the second quarter of this year as the ‘revival of knowledge-based industrial centers,’” adding, “A restructuring is underway simultaneously: buyers are flocking to assets whose prices have fallen, while those that could not hold out are being sold at auction.”