Startups abandon Pangyo Techno Valley

Soaring rent, poor transportation said to drive small firms back to Seoul

By Baek Byung-yeul

Pangyo Techno Valley, located south of Seoul, is a planned city with an aim to grow into the Korean equivalent of Silicon Valley.

Now home to more than 1,400 companies, the city has become a key place for the country's IT industry, but more startups like Sodacrew and Daangn Market are leaving Pangyo because of skyrocketing office rents and poor access to Gangnam, Gwanghwamun and other business districts in Seoul, industry officials said Tuesday.

Many small firms have seen no reason to stay there because poor accessibility has made staffing difficult. They added the increasing number of shared offices in Seoul also triggered their exit from Pangyo.

Sodacrew, a local fintech startup, said it moved its headquarters from Pangyo to a shared office near Samseong Station in southern Seoul in 2018. The firm said it expected there would be more advantages in relocating to Seoul and its estimation was right on the mark.

“We were doing business residing in the Gyeonggi Center for Creative Economy & Innovation in Pangyo. We stayed there for the cheap rent because we received supporting funds from the center but once the support program ended, we decided to move to Seoul,” an official of the firm said adding Sodacrew is now able to set up meetings with venture capitals much more easily and hire quality employees.

Daangn Market, a used goods trading service operator, also relocated its headquarters from Pangyo to Seocho-dong in southern Seoul in 2018. The firm said it decided to move to Seoul on the request of its employees whose homes are far away from Pangyo.

A real estate agent said he has been receiving increasing inquiries from startups in Pangyo seeking cheap-but-quality office spaces because the rent in Pangyo is too expensive.

“Startup owners who are currently located in Pangyo say they are paying too much for their office rental fees. There is no difference in renting office spaces between Seoul and Pangyo,” he said.

The agent said the average monthly rent per 3.3 square meters is about 50,000 won ($42), which is almost the same as that of Seoul's Gangnam-gu.

The agent added Pangyo is still a good place for companies in specific sectors such as the game industry but it is no longer attractive for firms in other businesses.

“Pangyo has a lower office vacancy rate compared to Seoul's prime locations such as Gangnam-gu. This means Pangyo is still a good place for doing business in specific industries like game business because many game firms are clustered there. But this doesn't apply to startup owners who cannot pay high office rental fees,” the agent said.

He added Seongsu-dong in eastern Seoul, which was known as a district of laborers and factories until the 1990s, is gaining popularity for startups due to its inexpensive rent and enhanced accessibility to many business districts of Seoul.

Local blockchain startup Terra is scheduled to move its headquarters from Gangnam Station to Seongsu-dong. Another fintech startup Paymint also made the decision to relocate there.

“Three subway lines cross through Seongsu-dong and it takes less than 30 minutes to get to major business districts in Seoul,” the agent said. “Seongsu-dong has emerged as a favorable place to set up a business due to cheaper rent and an increasing number of shared offices.”

Besides Seongsu-dong, Gasan Digital Complex and Guro Digital Complex in southwestern Seoul are also increasingly becoming favorable office locations for startups.

“A growing number of startups are looking to move their businesses from Pangyo to Guro or Gasan. There are many reasons why they want to start their businesses there but the biggest reason is cheaper rent,” said Ryu Yeong-hyeon, director general manager of the Korea Industrial Complex Corporation.

The official, who's responsible for managing the industrial complexes, also said these locations are becoming more popular than Pangyo because of accessibility. “Startups also prefer to have their offices in Gasan or Guro because they are in Seoul. These places have easy access to subway stations and bus stops enabling people to commute easilly,” he said.

Guro and Gasan are especially favored by manufacturing startups, he added.

“Many startups in these locations are hardware companies because they can make their sample products easily at micro factory workshops operated by the Korea Industrial Complex Corporation,” Ryu said.