Ranked by Bloomberg as the most innovative country in 2015, South Korea is synonymous with technology. It topped the ranking in the categories of research and development as well as, unsurprisingly, patent creation. Underpinning this is physical infrastructure development steered by the government.
The congregation of information technology (IT) enterprises and start-ups along Teheran-ro – today’s Gangnam Business District (GBD) – in the 1990s culminated in the area being designated Seoul Venture Valley in 2000. Around the same time saw the establishment of Seoul Digital Industrial Complex in Guro – dubbed the Silicon Valley of Korea – and Anyang Venture Valley, both of which feature a high concentration of IT firms. These have inspired the creation of Gwangyo Techno Valley, Pangyo Techno Valley – also dubbed the Silicon Valley of Korea – and Sangam Digital Media City more recently. In addition to IT, the newer industrial clusters also target biotechnology, cultural technology and nanotechnology, as well as the convergence of these technologies.
SEOUL'S TECH DISTRICTS
The success of these research and innovation hubs can be largely attributed to the incentives granted by the government. While prime net headline rents average around U.S.$30 per sq m per month in Seoul’s Central Business District (CBD), just 7.5 km away in the Digital Media City, rents for businesses can be as low as U.S.$3. Land for office development is also offered at a highly competitive price, not to mention significant tax breaks. Besides financial enticement, the government developed transport infrastructure that has shortened the commute between GBD and Pangyo Techno Valley by 75% to a mere 15 minutes for instance. On top of physical infrastructure, these hubs host support centres that provide mentoring programmes to help commercialise new products and connect start-ups with venture capital.
Lured by these benefits, companies have moved out of CBD and GBD to these emerging business districts. Competition for tenants will become even stiffer when construction is completed in the up and coming Magok Industrial Complex, Dongtan Techno Valley and the second Pangyo Techno Valley. However, these industrial clusters that incubate start-ups and foster innovation are essential to the future vitality of the Korean economy, especially when nearby China is moving up the value chain rapidly. As these start- ups mature, they will also drive leasing demand in the prime office markets of CBD, GBD and Yeouido Business District (YBD).