Last month, more than 300 Knowledge Industry Complexes were found to have gone to auction. The data company GGAuction has been compiling the monthly auction counts for Knowledge Industry Complexes since January 2001, and this is the highest figure since the statistics were compiled. The number of Knowledge Industry Complexes going to auction is increasing in new cities such as Siheung, Pyeongtaek, Hwaseong, and Hanam.

Some Knowledge Industry Complexes have been auctioned off for less than 20% of their appraised value. Although investors flocked due to the absence of real estate loan regulations, it is interpreted that the over-supply continues due to the economic downturn and the accompanying increase in vacancy rates, leading to more Knowledge Industry Complexes going to auction. While many Knowledge Industry Complexes are piling up for auction, over 1,500 new Knowledge Industry Complexes were approved and registered last month.

An empty commercial space in a Knowledge Industry Complex in Ok-gil District, Bucheon City. / Courtesy of Bang Jae-hyeok.

According to data company GGAuction on the 24th, the number of Knowledge Industry Complex listings that went to auction nationwide in May was recorded at 313. This is the highest number since GGAuction began compiling statistics on a monthly basis in January 2001. Known as 'factory-type apartments,' Knowledge Industry Complexes are exempt from the metropolitan area factory total quantity system that restricts new and expanded establishment of factories in the metropolitan area, unlike general factories. Additionally, loans can be obtained for about 80% of the sales or purchase price, and they were concentrated in sales during the rising real estate prices from 2020 to 2022.

Until the first quarter of last year, the number of Knowledge Industry Complex auctions nationwide did not exceed 100 each month. However, in April of last year, 114 listings came out, and in November of last year, the number exceeded 200 (223 listings).

In particular, the number of Knowledge Industry Complex auctions has been increasing in the Gyeonggi area this year. From January to the 20th of this month, there were 94 Knowledge Industry Complex auctions in Siheung and Pyeongtaek, respectively. This surpasses last year's annual auction listings (84 in Siheung, 62 in Pyeongtaek) in less than half a year. About 70 to 80 auctions also took place in Gimpo (88 listings), Hwaseong (80 listings), and Hanam (70 listings).

Lee Joo-hyun, a specialist at GGAuction, stated, "The Knowledge Industry Complexes that were perceived as a niche market have attracted significant investment due to relaxed loan regulations, but with the economic downturn leading to increasing vacancy rates, many are unable to manage their loan interest and are thus going to auction."

Graphic=Son Min-kyun.

Knowledge Industry Complexes that have gone to auction are being sold at prices significantly lower than their appraised values. The average sale rate nationwide last month was 64.7%, meaning a property appraised at 100 million won was auctioned for 64 million won. In some areas, even lower sale rates have been recorded. Osan recorded an average sale rate of 18% this year, while Yongin (29%), Pyeongtaek (37.4%), and Hwaseong (46.2%) were sold for less than half of their appraised values.

A Knowledge Industry Complex in Godeok-dong, Pyeongtaek, has an appraised value of 1.22 billion won but has been auctioned unsuccessfully three times from February to April this year, and the auction will be held again next month at a minimum bid of 70% of the appraised value. A center in Gurae-dong, Gimpo, is also scheduled for auction next month at a minimum bid of 9.506 million won, which is 12% of its appraised value (800.8 million won). This center has failed to sell for six consecutive times since December last year.

Although the number of Knowledge Industry Complex auctions is increasing, new supply is still on the rise, suggesting that the over-supply phenomenon will continue for the time being. According to the Korea Industrial Complex Corporation (KICOX), the number of approvals and registrations for Knowledge Industry Complexes nationwide reached 1,547 by the end of May this year. This is an increase of 380 (32.5%) from 1,167 when statistics were first compiled in April 2020.

Seo Jin-hyung, a professor at Kwangwoon University’s Department of Real Estate Law, noted, "The Knowledge Industry Complex has been experiencing a prolonged over-supply phenomenon where supply exceeds demand," adding that "it will be difficult to resolve this over-supply situation in the future."