Seoul landmarks host co-working spaces

WeWork’s logo was added to Jongno Tower in central Seoul, one of the most famous skyscrapers in the city, in September.

The tower now hosts a branch of the world’s largest co-working space company, which entered Korea in 2016. Co-working companies are transforming the faces of landmark buildings north of the Han River as they crowd the area.

WeWork also placed its logo this May on Seoul Square, a building formerly occupied by Daewoo Group that sits across from Seoul Station, one of the busiest areas in central Seoul. Local co-working start-up FastFive will take up the former headquarters of Hana Card later this year.

The changes are largely due to local and foreign financial companies buying up buildings and leasing them out to co-working companies. Jongno Tower, formerly owned by Samsung Life Insurance, was handed over to IGIS Asset Management in 2016.

Real estate management companies such as IGIS buy buildings with funds procured from investors and earn profit from rental fees and building sales returns. For investors, returns rise when buildings have fewer vacancies. Such companies have rushed to enlist co-working services to take over the job of filling up buildings.

Co-working companies operate by dividing up buildings into numerous offices and renting them out on a monthly basis. The offices provide shared communal spaces such as lounges, meeting rooms and office pantries.

As the number of small start-up companies has increased over the years, so has the demand for co-working office spaces. Founded in 2015, FastFive has increased its number of office locations to 13 in just three years.

According to a survey by real estate consulting company R2Korea on 1,278 office buildings around Seoul, the vacancy rate for office buildings in the second quarter this year decreased by 0.4 percentage points to 9.6 percent compared to the previous quarter. R2Korea pointed to co-working offices renting out multiple floors in a building as the reason behind the decrease.

“As office sharing rapidly increases, building owners are able to lower the short-term vacancy rate while acquiring long-term tenants,” said Hana Institute of Finance senior researcher Kim Mun-tae.

Some of Korea’s largest companies are also taking an interest in shared offices. LG Household & Health Care and Hana Financial Group are moving individual teams into shared working spaces operated by WeWork. The majority of such teams deal with special projects. They require an environment located away from headquarters and often collaborate with start-up companies. The shared office model, originally intended for start-ups, is changing the way conventional companies work.

As the market undergoes rapid growth, investors are flocking to it. According to KT Economics and Management Research Institute, the local co-working office market is expected to grow 63 percent annually to be worth 770 billion won ($679.5 million) in 2022. The popularity of co-working services has led investors from the wealthy Gangnam area of southern Seoul to recently invest billions of won into Indonesia’s largest co-working company, EV Hive. The investors joined a $20 million investment along with big players such as SoftBank Ventures, Naver and STIC Investments.

Vice President Kim Kyung-Rae of H&CK Partners, which organized the investment, explained that “investors who realized the growth potential of shared offices in Korea believe that there is value in investing in the largest co-working space company in Indonesia, which has a younger population and a larger start-up crowd.”

BY YEOM JI-HYEON [chae.yunhwan@joongang.co.kr]