Co-living in Korea: unveiling new market opportunities

Korea’s co-living sector has become a growth industry in recent times.

August 04, 2023

Co-living is a concept that provides shared living spaces and furnished personal spaces for people to stay. In Korea, the co-living sector is still nascent, facing challenges due to the stringent regulations and absence of relevant laws. However, the demand for co-living is steadily increasing, and investors are also gradually expressing a keen interest.

The landscape of Korea’s co-living market

Most co-living facilities in Korea are in the CBD area, especially near key metro stations, backed by buoyant demand from young generations in their 20s and 30s. Also, there is demand from professionals who seek to socialise and participate in community events rather than those focusing on finding cost-efficient options. Notably, co-living facilities in Seoul offer upscale amenities, driven by high rental fees. They provide various programmes such as wine and cooking classes, music performances, fitness activities, and workshops, encouraging user-initiated gatherings. As a result, co-living spaces are gaining popularity among users who prioritise an enhanced quality of life. Many operators are expanding their presence to meet the demand of young professionals. SK D&D has announced its plans to supply 50,000 units in Seoul by 2026, and Koramco Asset Trust plans to develop a co-living house on the Hyundai Oilbank Jaedong Gas Station site.

Co-living investment market

Although there have not been many co-living transactions, several investors are gradually expressing interest in the co-living sector. MGRV, a local co-living facilities operator, successfully attracted a Series B bridge investment worth KRW 12.5 billion (USD 9.6 million) from a group of investors this year. In 2018, GIC and domestic institutional investors participated in an investment with SK D&D to develop four co-living facilities under the brand name 'Episode’. These facilities serve as the underlying assets in SK D&D’s REIT. Mastern Investment Management is venturing into co-living investments through REITs which recently announced the signing of an MOU with Union Place, an interior design company, to list a co-living REIT. IGIS Residence REIT added co-living mixed property in Hongdae and two hotel-type co-living properties, Dears Myeongdong and Dears Pangyo, into its portfolio.

Furthermore, some investment management companies have signed joint venture agreements with co-living operators for collaborative investment. The UK-based private equity investment company Intermediate Capital Group signed a joint venture agreement with a prop-tech organisation, Homes Company, pioneering co-living services in Korea, for the joint development of co-living assets.

Decree-backed growth potential

Until the government established the decree of the construction law in March 2023, including specifications for rental dormitories, the co-living sector in Korea was experiencing challenges in expanding its presence. Earlier, due to the absence of relevant regulations, co-living facilities had to adhere to the regulations of other sector types, such as residential and office. However, the decree allowed the clear-cut implementation of co-living facilities and private enterprises to construct rental dormitories. Eased restrictions on floor area ratio and parking space requirements will likely increase profitability with the ability to accommodate more households, spurring growth in this sector.