[NewsSpace=Jack Moon] Seoul's office landscape is showing signs of transformation. Once dominated by the three major districts of Gangnam, Yeouido, and the Central Business District, a new star is rising: Magok. Recent data analysis from RSQUARE reveals the reasons behind this shift.

According to RA (RSQUARE Analytics), office rental prices in the Magok area rose  by 7.2% in the second quarter of 2024 compared to the same period last year. This figure significantly exceeds the average increase of 5.1% across Seoul's three major districts, indicating a rapid surge in demand for Magok.

An intriguing phenomenon of “large-scale occupancy” has recently emerged in Magok. The completion of One Grove, a complex business facility comparable to Yeouido's IFC, is set to attract major corporations and large supermarkets, hinting that Magok is evolving into an independent business hub rather than merely a residential area.

These changes are not coincidental. An analysis of leasing transaction data by RA reveals that in the first half of 2024, 45% of new tenant companies in Magok were in the IT and biotech sectors, a significant increase from 30% the previous year. This shift is largely driven by the establishment of an R&D cluster centered around LG Science Park, prompting related companies to relocate their operations to Magok.

Citing JLL's analysis, the proportion of manufacturing industries in the central commercial area of Magok has decreased from 60% to 52%, while the share of IT and biotech industries has risen from 35% to 43%. This shift is reminiscent of a once-barren land where diverse plants begin to flourish, creating a rich ecosystem. Such diversity is enhancing Magok's appeal as a business center.

In 2024, two out of three large office transactions of over 10,000 square meters in Magok were made by IT and biotech firms. This trend demonstrates that high-tech companies are choosing Magok’s fertile ground for synergies in research, development, and production.

However, the rise of Magok faces challenges amid a downturn in the construction market and the deterioration of Project Financing (PF) projects. As the government accelerates restructuring efforts for PF projects, some developments in Magok are being re-evaluated. Industry sources report that 15% of PF projects in Magok have been classified with “caution” or “risk of failure” ratings.

Ironically, this situation may underscore Magok's potential. Transaction data shows that 60% of office transactions in Magok during the first half of 2024 involved long-term leasing contracts, a substantial increase from 45% in the same period last year. This suggests that investors are recognizing and valuing Magok’s future prospects.

The commercial real estate market in the southwestern region of Seoul, centered around Magok, is entering a dynamic phase of change. While facing the challenges of PF restructuring, it is simultaneously emerging as a land of opportunity. The data strongly indicates that Magok could establish itself as a new office hub. Will Magok solidify its position as Seoul's fourth major office district? The answer lies within the data.