• Investing in Korea Office Space & Buildings: A Foreigner’s Guide

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    Seoul continues to climb in the rankings of Global Financial Competitive Indexes and gains increasingly more interest from investors. It’s also called the best digital city in the world with an economy that outperforms many of its neighboring peers.

    Investing in office space and buildings is fairly straight-forward in Korea and Seoul. It also has one of the most developed REIT markets in the world.

    In this article, I explain all the basics you need to know when investing in Korean office space and buildings.

    Topics covered:

    • Can foreigners buy office space in Korea?
    • Korea’s Office Market
    • Office Prices in Seoul
    • How much does it cost to buy a building in Korea?
    • Property Taxes When Buying Office Space and Buildings
    • How can I find office space for sale in Korea?

    Can foreigners buy office space in Korea?

    Foreigners generally don’t have any issues to invest in commercial real estate in Korea. The country has a transparent and developed market where there is no need to set up a local company, for example, before you can get hold of office space.

    Thus, property ownership regulations are similar to Japan and foreigners can get freehold ownership of any kind of property. With that said, there are a few property types that you cannot buy without permission from Korean authorities.

    The regulations are stated in three different acts referred to as the Foreigner’s Land, the Acquisition Act, the Registration of Real Estate Act, and the Foreign Exchange Transactions Act.

    The Foreigner’s Land Acquisition Act explains that property purchases in sensitive areas such as where the military operates, where there are cultural properties with heritage value, or conservation areas to protect nature, for example.

    For more information about the Acts, I recommend you to read my separate article that explains how you can buy real estate in Korea.

    Korea’s Office Market

    Korea’s office space market was affected badly during the first half of 2020 but saw a comparably quick recovery during the second half.

    Two of the reasons behind this was that the economy recovered faster than possible (the government handled the outbreak exceptionally well) at the same time as the supply of new space increased.

    Due to rapidly increasing rents, the industry of office sharing is becoming popular as well. According to analysts, the market will expand from around KRW 60 billion (USD 50.3 million) to an astonishing KRW 770 billion (USD 646 million) by 2022.

    Most of the coworking spaces are located in Seoul and where many foreign companies have set up many offices, like WeWork. Another interesting trend is the decentralization of Seoul’s office market.

    Several large-sized subsidiaries of Samsung Group plan to move from the upscale area of Gangnam which will result in new submarkets.

    Companies like LG and Hyundai Heavy also plan to relocate to other areas of Seoul, while Hana Financial Group plan to move out from Seoul completely.

    Office Prices in Seoul

    Prices for serviced offices have increased much in Seoul as mentioned.

    Instant Office has made a comparison of the average prices per person when renting serviced offices in Seoul and other cities in the region:

    • Hong Kong: KRW 500,000 – 1,800,000 / month
    • Beijing: KRW 700,000 – 1,400,000 / month
    • Singapore: KRW 500,000 – 1,250,000 / month
    • Seoul: KRW 700,000 – 1,000,000 / month
    • Shanghai: KRW 450,000 – 1,000,000 / month
    • Tokyo: KRW 550,000 – 1,000,000 / month

    Let’s review some examples of offices and the prices to rent units:

    Seoul Finance Center

    Seoul Finance Center is a premium office building located in the center of politics, economy, finance, media, and culture, enabling an optimal business environment with great facilities and services.

    It’s close to the palace and sightseeing spots, and close to subway lines 1, 2, and 5. You can find serviced offices from KRW 480,000 / person and month here.

    117 Namdaemun-ro

    This office building is located in the CBD and has access to subway lines 1 and 2. The subway also connects to the Incheon International Airport and the Gimpo Airport. The building is well-known among locals.

    Serviced offices from KRW 380,000 / person and month.

    How much does it cost to buy a building in Korea?

    This article focuses on large-sized transactions when primarily corporations invest in office space and buildings in Seoul. Many foreign investors wonder how much a whole building costs in Seoul.

    The most direct and easiest way to confirm this is to review a handful of options that are available in the market. Below I have listed examples of buildings for sale in Seoul and a short description of each unit.

    Building 1

    • Location: Seoul 02580
    • Size: 7,248 m2 (land size 830 m2)
    • Price: KRW 35 billion (around USD 31,3 million)
    • Price per square meter: KRW 4,828,918 (USD 4,318)

    Building 2

    • Location: Seoul 04575
    • Size: 4,559 m2 (land size 479 m2)
    • Price: KRW 22 billion (around USD 19,6 million)
    • Price per square meter: KRW 4,825,619 (USD 4,300)

    Building 3

    • Location: Seoul 01701
    • Size: 1,910 m2 (land size 423 m2)
    • Price: KRW 3.8 billion (around USD 3.4+ million)
    • Price per square meter: KRW 1,989,528 (USD 1,780)

    Only the 4 to 5th floors of the building are for sale. The whole building is actually not for sale.

    As you can see, prices are generally in the tens of millions of US dollars, at least if you look for a larger building located in the central areas. Of course, there are buildings available that are in the price range of hundreds of millions of US dollars as well.

    Property Taxes When Buying Office Space and Buildings

    You must understand your tax burden before you engage in the Korean real estate market. Below you can find a simple overview of the different taxes that exist.

    Stamp Duty

    The stamp duty is low and stretches from KRW to KRW 350,000 (ca USD 320). Thus, the amount is almost negligible and you should focus your attention on the acquisition tax instead.

    Property Acquisition Tax

    Buyers are subject to a property acquisition tax of 4.6%, a rate that applies to commercial property in general.

    Value Added Tax (VAT)

    Commercial property sellers are also subject to a VAT with a rate of 10% that is multiplied by the sales value.

    Keep in mind that you might be able to get reimbursed if you have a corporation. This should be discussed in greater detail with a local partner.

    The VAT is generally paid by the seller but can be passed on to the buyer.

    Capital Registration Tax (Capital Duty)

    When companies register their incorporations or the capital increases, a capital registration tax of 0.48% is charted. In Seoul, the rate goes up to 1.44%.

    Annual Property Tax

    Owners are subject to an annual property tax of 0.15% to 0.50% and multiplied by the assessed value. The value and the location of the unit will determine the final rate.

    Capital Gains Tax

    Capital gains are taxed at 11% of sales or 22% of gains, whichever is lower.

    How can I find office space for sale in Korea?

    Investors generally have two options when searching for office space and buildings in Korea:

    • Look for listings online
    • Contact a commercial real estate agent

    Looking for listings can be time-consuming and the listings are often limited. Besides, most agencies advertise office space and buildings in Korean, with limited information, which makes the process more complex.

    Finding a commercial real estate agent and partner is probably your best as you can get multiple options presented at once and consultation for buying regulations.

    Asia Property HQ works with leading partners in Korea and can also help you invest in office space in Korea.

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