[Edaily Marketin KIM SUNG-SOO Reporter] In the third quarter of this year, the knowledge industry center market is experiencing both a slowdown in transactions and increasing pressure from non-performing assets. As interest rate hikes coincide with tighter lending controls by financial institutions, the burden on both the sales market and the auction market appears to be growing.

Compounded by a halt in new supply, concerns are mounting that the market downturn could become prolonged.

988 Transactions in Q3 of This Year… Lowest Since Q4 2023

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, nationwide transactions of knowledge industry centers totaled 988

in the third quarter of this year

, down 19.3% from the previous quarter and 10.7% from the same period last year. This is the lowest level since the fourth quarter of 2023.

The total transaction value was 417.4 billion won, and the total transaction area was 98,975 square meters, down 24.6% and 25.0%, respectively, from the previous quarter. The decline in transaction value and area was more significant than the drop in the number of transactions. This is attributed to the waning impact of large-scale and bulk transactions observed in the second quarter.

By region, transactions increased in Seoul and Incheon, while they decreased in Gyeonggi and Busan. Seoul recorded 344 transactions, an 8% increase from the previous quarter, and Incheon recorded 60 transactions, a 22% increase. In contrast, Gyeonggi saw a 22% decrease to 504 transactions, and Busan saw a 27% decrease to 16 transactions.

The total transaction value decreased by 14% to 187.6 billion won in Seoul and by 28% to 181.5 billion won in Gyeonggi Province. In Incheon, the total transaction value rose by 38% to 19.7 billion won.

The nationwide average price per 3.3 square meters (pyeong) was 13.94 million won, up 0.5% from the previous quarter and 4.9% from the same period last year. However, regional disparities were pronounced.

In Seoul, the price per pyeong rose 9% to 22.86 million won, while in Gyeonggi Province, it fell 12% to 11.18 million won. The rise in Seoul’s prices appears to be due to a decrease in the proportion of mid- to low-priced transactions in areas such as Geumcheon-gu. Conversely, the decline in Gyeonggi Province’s prices is interpreted as the result of an increase in the share of transactions in outlying, low-priced areas such as Pyeongtaek.

Pressure from distressed properties has also become evident in the auction market. The number of auctions for knowledge industry centers in the Seoul Metropolitan Area in the third quarter of this year reached 1,657, a 7% increase from the previous quarter. This marks the sixth consecutive quarter of growth and is nearly double the 818 auctions recorded during the same period last year. Although 306 properties were sold at auction, the success rate stood at only 18.5%.

The auction price ratio (the ratio of the actual winning bid price to the appraised value) stood at 44.7%, marking the lowest level since 2020. This means properties were sold for less than half of their appraised value. This ratio fell by 6.5 percentage points (p) compared to the previous quarter.

Polarization was also evident in the auction market by region. Gyeonggi Province accounted for 70% of all auctions in the Seoul Metropolitan Area, with 1,163 auctions held. Its auction price ratio was 41.8%, the lowest among the three metropolitan areas of Seoul, Incheon, and Gyeonggi.

While Incheon’s success rate remained at 43.0%, Seoul recorded a rate of 59.3%, demonstrating relatively strong price resilience. Analysts note that the auction market reflected growing supply pressures—particularly in newly constructed properties on the outskirts of Gyeonggi Province—as well as widening disparities in asset value declines across regions.

The cycle of “declining collateral value → reduced loan limits → auctions”

The deteriorating financial environment was also cited as a factor adding to market pressures. The Bank of Korea raised the benchmark interest rate twice in a row in July and August, bringing it to 3.00%.

In the financial sector, lenders are reducing loan limits for loans secured by knowledge industry centers, and there have been cases where lenders are requiring partial principal repayment during loan maturity extensions. The loan-to-value (LTV) ratio, which used to be as high as 80%, has dropped to as low as 50% in some regions.

In this environment, a decline in asset prices can lead to a drop in collateral value and reduced loan limits, creating a vicious cycle in which borrowers unable to bear the additional financial burden are forced into foreclosure auctions.

The fact that the number of auctions conducted in the third quarter of this year rose to 1,657 and the auction success rate fell to 44.7% appears to reflect these financial pressures.

New supply has also effectively come to a standstill. There were no new pre-sales of knowledge industry centers in the third quarter of this year, marking four consecutive quarters without new pre-sales since the fourth quarter of last year. This is due to the difficulty in securing the viability of new projects amid a credit crunch in the project financing (PF) market, rising construction costs, and the burden of unsold units.

On the other hand, six projects with a total floor area of 426,000 square meters were completed in the third quarter of this year. Two large-scale projects in western Busan (each with a total floor area of 166,000 square meters) accounted for the majority of the completed floor area, while only one project—in Guro, Seoul—was completed in the Seoul metropolitan area.

The government has begun implementing institutional reforms to address the vacancy problem in knowledge industry centers. On September 10, the Ministry of Trade, Industry and Energy announced the “Measures to Address Vacancies in Knowledge Industry Centers and Institutional Reform Plans,” pledging to pursue the repurposing of centers with high vacancy rates and the relaxation of industry-specific regulations.

A survey of facilities completed between 2023 and 2025 showed a vacancy rate of 43.5% and an unsold rate of 26.9%. However, these figures are based on the units surveyed, and since there is a possibility of double-counting, they should not be simply added together or interpreted as representing the entire market.

An official from R Partners stated, “The key variables for the knowledge industry center market going forward are whether the volume of properties up for auction has peaked and whether the auction success rate has bottomed out.” The official added, “While there were some signs of market recovery last September as the number of transactions increased to 421, the total number of transactions in the third quarter of this year fell back to 988, so the sustainability of the recovery has yet to be confirmed.”