H. Yoo
Research expert covering South Korea
Office real estate in South Korea - statistics & facts
A prominent feature of South Korean office real estate is officetels, a portmanteau of office and hotel. Officetels combine living and office spaces within a single unit and are seen as commercial real estate. They have been described as office spaces, studio apartments, urban studios, condominiums, and quasi-housing, but their true definition is as ambiguous as their legal status. Because of this peculiarity, it is difficult at times to distinguish between office and residential space in South Korea. Officetels were introduced in the 1980s to sell real estate when office space struggled to sell, and later deregulation allowed for them to be sold for both commercial and residential purposes. In 2021, over 300,000 units in the housing survey were considered non-residential buildings, such as officetels, in South Korea.
What are officetels?
Officetels are usually between 85 to 120 square meters and have kitchenettes, sinks, toilets, and a designated work area. It is not uncommon for them to be used by single-person households and students alongside office workers. According to the Housing Act, they are not considered genuine housing but are rather commercial real estate that can be used for residential purposes. Although officetels can be used for residential purposes, some people own them solely for business purposes. However, differentiating the actual use purpose of officetels has been practically difficult and has had financial implications.Blurred line between officetels and regular housing
Because officetels are not considered housing under the Housing Act, they are excluded from special fixed-rate long-term mortgage loans, otherwise known as bogeumjari loans, given exclusively to potential homeowners. However, officetels are considered housing according to the Income Tax Act, making those possessing a home for residential purposes and an officetel for commercial purposes unqualified for the special one-household one-house tax deductions. The tax exemption only allows single households to have the sale of their house exempt from taxes or significantly reduced under certain conditions if they are registered to have only one home. Rising interest rates in the past months have brought down the demand for officetels, partly due to the disadvantages of owning an officetel over residential housing. Demand will likely continue declining, as has been the case for other commercial buildings.
