A crack has emerged in Korea's unique jeonse system. Following the occurrence of large-scale jeonse fraud, a gap has opened in the domestic housing market, which had predominantly relied on transactions based on trust between individuals. This, coupled with the increase in single-person households due to demographic changes favoring flexible monthly rent, has created an environment for the development of the corporate private rental housing market. However, the concept of 'corporations as landlords' remains unfamiliar in the country.
On the 20th, at 'Mangrove Sinseol' located in Dongdaemun District, Seoul, MGRV CEO Cho Gang-tae said, "In overseas markets, 30% of the rental market is already corporations as landlords," noting that as cities develop, the proportion of corporate private rental housing will naturally increase.
CEO Cho stated, "As asset prices and rents rise along with urban development, the expectations of users for housing services also increase," and added, "Individuals have limitations in meeting these needs. Corporations will fill this gap."
MGRV is a leader in the domestic corporate private rental housing market. It operates the co-living brand 'Mangrove.' Co-living is a form of housing that shares common areas like kitchens, living rooms, and community spaces outside of private rooms. Mangrove is responsible for everything from planning to developing and operating the residential facilities. Simply put, Mangrove acts as the landlord for its dwellings.
MGRV currently operates six Mangrove locations in Seoul, Gangwon, and Jeju. It is developing six projects in Seoul, including Eunpyung Senior Housing and youth housing near transit sites, backed by the Korea Housing and Urban Guarantee Corporation.
The Canada Pension Plan Investment Board (CPPIB), one of the top 10 pension funds in the world, has highly evaluated the potential of the domestic corporate private rental housing market. Earlier this year, CPPIB signed a joint venture agreement with MGRV for co-investment and launched a private rental housing development project worth 1 trillion won. Once the project with CPPIB is completed, a pipeline capable of accommodating a maximum of approximately 5,500 people across 16 locations will be established.
CEO Cho predicted that as the corporate private rental market develops, "we will transition to an era where the usage of dwellings is more important than their supply."
What does CEO Cho envision for the future, which is presenting a new direction for the domestic housing market? The following is a Q&A with CEO Cho.
- In Korea, the concept of corporate private rental housing is unfamiliar. How do you view the growth potential of this market?
The jeonse system, which was believed to be a solid line in the domestic housing market, did not operate properly during the jeonse fraud crisis. Those who provided deposits through jeonse loans did not get their money back. This is a serious problem. The housing market divides into those who fully own their homes and those who need to use them. As asset prices rise globally, people are inevitably unable to own homes and must rely on rentals. In this process, the share of corporate rentals is naturally increasing. However, at present, there are very few rented dwellings provided by private corporations in our country. Rentals provided by individuals and the public have limitations in meeting people's needs. If capital-rich corporations can streamline, scale up, and reduce costs in supply, they can fill this gap.
- Global investors are paying attention to the Korean housing market, particularly the significance of the CPPIB's investments domestically. Can you elaborate on that?
CEO Cho asserted, "With CPPIB's investment as a turning point, the domestic housing market will fundamentally change. It's no longer enough to build and sell dwellings like during previous high-growth periods; a new market will emerge where dwellings are invested in and continuously operated. In simple terms, while previously people shopped in small stores, now they will choose homes in large shopping malls or department stores. We are transitioning to an era where usage is more important than supply."
- There are concerns that rental prices will rise sharply when corporations enter the rental business. What is your take on this?
CEO Cho responded, "While some think that rents will rise when corporations come in, this is not the case. Even now, with corporate participation below 1%, rental prices in the private rental market are rising steeply. Corporate private rental housing is not a business that seeks high profits like real estate sales. They are not interested in making money all at once. They prefer to generate stable revenue over a long period like bonds. Corporations market their offerings as ‘products with this value for this price,’ and if they don't sell, they lower the price or increase the product's value. Unlike individual landlords who often don’t lower rents even with vacant spaces, corporations cannot operate under such a structure. If customers turn away, the company will disappear."
- As the corporate private rental market evolves, various players are emerging. What are MGRV's strengths?
CEO Cho highlighted, "It is digital transformation (DX). The entire process from customers checking information about their homes to signing contracts and moving in is done 100% online. All information related to facilities, contract periods, and room types is transparently provided. In a sense, this is expected, yet MGRV is the only one to implement this in Korea. We have developed this system to comply with the regulations of Korea."
Another strength is that we have a vertically integrated organization centered around the customer. Currently, in the market, real estate development companies, product planning companies, and those creating operations and systems operate separately. In this structure, it is unclear what is best for the customer. MGRV prioritizes what kind of experience to offer the customer first. Then, they plan the space and develop, followed by operations according to the plan. Product and space planning, development, operations, and tech organizations are all within one entity. This is why we were able to partner with CPPIB.
- MGRV is also planning co-living spaces targeted at seniors. Construction companies and insurance companies are also interested in senior housing. What differentiates your co-living spaces for seniors?
CEO Cho remarked, "While it is often thought that seniors need care, that typically applies after the age of 80. Our business targets those aged 65 to 75. Questioning whether senior housing is necessary in our country, where multi-family housing like apartments are already developed, we found that we can provide answers to the senior demographic that is contemplating how to enjoy a healthy life without obligations and burdens. We plan to offer 'dwellings that can fill a daily schedule with enjoyable activities.' The configuration and usage method will differ from existing co-living models. Since they need to manage their lifelong savings, we also plan to restructure the fee structure."
MGRV plans to introduce senior-specialized housing in Eunpyeong District, Seoul, in 2029.
- MGRV is also preparing to enter the Japanese market, where corporate private rental housing has already become commonplace, with over 60% of rental properties run by rental specialized corporations. What is your plan for this entry?
CEO Cho explained, "We will not directly engage in real estate development in Japan. One company manages about 1.27 million dwellings. The structure is such that even personal homes are managed by a corporation. However, there is no system in place. Our digital transformation is a strength that we are aiming to enter Japan within three years. I believe this solution is needed not only in Korea but is a common issue worldwide."
- Until last year, the government held a stance of stabilizing housing supply by corporatizing rental housing. Now, with the early presidential election approaching, all related discussions have been halted. As a business operator, what do you expect from the government?
CEO Cho stated, "The industry is well-prepared for the corporate private rental housing market. However, there is low predictability in regulatory aspects. While other countries allow private companies to supply housing services, our country has many regulations, resulting in low predictability for the industry, making investors hesitant to invest. Without investment, there is no industry. Various institutions in Korea have shown interest, but they prefer to see more market transitions. The lack of trust in policies complicates investments.
Once the market opens, corporations will be judged by customers. The supply issue is also serious. The public sector alone cannot resolve this issue. The private sector cannot monopolize the rental market either. We must provide diverse options to housing consumers.
- What housing services are you aiming to provide?
CEO Cho concluded, "The goal is to ensure that customers can fully enjoy living through MGRV's dwellings. We aim to enhance the appeal of living spaces. We provide content that emphasizes the local community. In numerical terms, our immediate goal is to manage 100,000 units. Assuming the revenue from one unit is 10 million won annually, the total scale would be 1 trillion won. This would be a very stable and meaningful transaction scale for the corporation. This way, living spaces will become platforms that can collaborate with various industries like finance and home appliances.