This February, Samsung Group purchased two 22-story twin buildings in central Seoul for 720 billion won (US$620 million). Acquiring K-Twin Tower was a rare purchase for the national giant that has been selling off its own buildings in the city.
The central location and big-name tenants like Microsoft and Kim & Chang, Korea’s top law firm, were attractive enough but industry sources say it was actually latecomer WeWork, the US co-working giant that helped reduce the vacancy rate to below 5 percent in a 35-year lease deal.
The then building owners US private equity firm Kolberg Kravis Roberts and Hong Kong-based investment firm LIM Advisors reportedly lured WeWork with generous incentives, including months of free rent and financial support for refurbishment, before the planned sale.
The deal price worth 28 million won per 3.3 square meters was a record at the time and the owners earned more than 200 billion in just three years.
“It’s a win-win for both WeWork and building owners,” a real estate consultant who has knowledge about WeWork’s lease deals in Seoul told The Investor on condition of anonymity. “Having WeWork as a client helps raise both the occupancy rate and deal price. But for buyers, the price is sometimes a bubble.”
WeWork, a New York-based startup offering flexible and trendy workspace for startups and bigger firms more recently, has become the hottest name in the city’s office lease market where big commercial buildings are desperate to fill their empty spaces.
Since its debut in 2016 in Korea, a total of nine branches have opened, with three new openings in the coming months. Once the planned Jongno Tower branch opens in September, the total capacity is expected to reach 15,000 people across the venues.
The 12 locations are high-density even considering the firm’s aggressive expansion across the globe. It operates 42 locations in China, including Hong Kong, while there are 10 and eight in Japan and Singapore, respectively.
“Many startups and companies are interested in joining the WeWork network. Also, due to Seoul’s established infrastructure, transportation, and high population density, we were able to expand faster at the city’s symbolic spots,” said a Seoul-based WeWork official who also declined to be named.
“We sign a long-term lease, which is good for building owners because it keeps the occupancy rate high,” she added without further elaborating on more detailed contract terms citing a company policy.
More recently, WeWork played a key role in resuming the sales talks of Seoul Square, another landmark building in central Seoul whose anchor tenants include Mercedes-Benz, Siemens, and LG. The building had been struggling to find a new owner for years as the occupancy rate showed no signs of recovery.
But the stalled talks gained fresh momentum early this year after WeWork signed a deal to lease the building’s four floors, or 20,000 square-meter space, for 20 years. With the new entry, the vacancy rate fell to less than 10 percent. Sources say Hana Financial Investment is seeking to acquire the building for about 1 trillion won.ea
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