SOUTH KOREA Trends and Developments Contributed by: Junghwan Lee, Dong Seok Woo, Jun Woo Cho and Jee In Kim, Lee & Ko
ty, recent data centre development has increasingly clustered in locations outside of Seoul, including Yongin, Goyang and Incheon, where grid access is considered more achievable. Some sponsors are also exploring “Edge” data centre platforms below the 10 MW threshold. Where an existing electricity- use agreement has already been secured, preserv - ing that agreement has become critically important: if the agreement is cancelled or terminated and a new agreement with Korea Electric Power Corpo - ration (KEPCO) must be entered into, the project may be pushed back into the tightened grid impact assessment process. Resident complaints and municipal permitting delays also remain material execution risks, meaning that joint venture arrange - ments between global data centre operators and Korean developers should expressly allocate responsibility for permitting delays, project failure scenarios and investor exit options with particular precision. Rise of the alternative living sector: senior housing and private rental housing Demographic change and the accelerating shift from “jeonse” to monthly rental arrangements are driving investment into alternative living sectors such as sen - ior housing and professionally managed private rental housing, including co-living assets. As foreign capital becomes increasingly active in this space, investors face a complex mix of deregulation initiatives and tax uncertainty, making thorough and conservative legal diligence all the more important. • Deregulation of Senior Housing and Diversifica - tion of Development Structures: As of December 2024, South Korea entered “super-aged” status, with more than 20% of its population aged 65 or older. In response, the South Korean government has introduced policy measures to promote senior housing, including lowering the legal threshold for development by permitting senior housing facili - ties to be developed and operated on the basis of secured use rights over land and/or buildings alone. The government is also considering the reintroduction of for-sale senior housing in depopu - lation areas, as well as a new “Silver Stay” product for homeowners aged 60 and above. To ensure the legal compliance of senior housing projects, inves -
tors should carefully confirm whether a project can satisfy the applicable licensing and operational requirements under sector-specific legislation, including the Senior Welfare Act. • Foreign Capital in the Private Rental Housing Mar - ket and Changes to the Long-Term Rental Hous - ing Regime: Global institutional investors remain active in South Korea’s residential rental sector, both through joint ventures with domestic asset managers and through fund structures formed to acquire and operate rental housing assets. At the same time, the government is considering a new “corporate long-term rental housing” platform that would offer greater flexibility on rent caps and tax benefits to corporate operators leasing 100 or more housing units for a minimum of 20 years. If implemented, the platform would make early-stage exit planning crucial, given the capital constraints inherent in a 20-year operating period. • Tax and Other Key Risks. In the living sector, uncertainty over the continued availability of tax benefits remains a key risk factor. As part of its recent housing-market stabilisation measures, the government removed the comprehensive real estate holding tax exclusion that had previously applied to acquisition-type private rental housing. Investors must also consider recurring issues such as the appropriateness of long-term O&M arrange - ments with operators, tenant-protection require - ments, deposit-return exposure, and statutory limitations on rent increases. Conversions and value-add strategies for existing assets In response to oversupply in cold storage logistics and the growing stock of ageing commercial assets in urban locations, investors are increasingly considering strategies to convert existing sites and buildings into data centres, urban logistics facilities or multifamily residential assets. In these transactions, investors need to confirm at the outset whether the proposed new use is compatible with the applicable municipal zoning ordinance and district-unit plan. Conversion transactions also tend to involve layered legal issues, including the lawful surrender or eviction of existing tenants and amendments to existing construction or contractor arrangements in connection with major repair or extension works.
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