Knowledge industry centers are experiencing increased financial burdens for buyers as they face rising vacancies and unsold units, along with reduced loan availability and declining collateral values. As asset values decrease, financial institutions are applying a more conservative loan-to-value (LTV) ratio, resulting in lower loan limits and additional pressures for principal repayments or conversions to personal loans.
According to the Korea Real Estate Development Industry Research Institute, the vacancy rate for knowledge industry centers in the metropolitan area reached 55% as of February this year. The average unsold rate for 65 projects supplied in the metropolitan area from 2022 to 2024 was recorded at 37%, with Seoul's rate reaching 43%. As vacancies increase, some landlords are lowering rents to attract tenants, but the burden of management costs makes it difficult to recover profitability.
Financial institutions are also reassessing the collateral value of knowledge industry centers more conservatively, leading to stricter loan evaluations. Buyers who previously acquired properties with an LTV of up to 80% are now facing reduced loan limits due to declining collateral values, with some loans being converted to personal loans. This cycle of price declines leading to lower collateral values, reduced loans, and increased repayment burdens exacerbates financial difficulties.
The auction market is also facing challenging investment conditions. A real estate industry insider noted, “Demand for commercial real estate is more limited than for residential properties, making it likely that properties will be repeatedly unsold or sold at prices below market value,” adding that “low winning bids further depress the market value and collateral of knowledge industry centers.”
* This article has been translated by AI.
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