|International Finance Center in Yeouido|
The International Finance Center (IFC) in Yeouido is struggling to attract tenants for its two newly-opened office towers, denting Seoul City's ambitious plan to make it Northeast Asia's financial hub.
Real estate market analysts painted a bleak outlook for the IFC, saying it will struggle to fill its office buildings with financial firms and other businesses amid the prolonged property sector slump and other unfavorable economic conditions.
According to Seoul City and AIG Korea Real Estate Development Monday, the IFC will hold an official opening ceremony Thursday following the completion of office tower two and three.
AIG Real Estate Development has overseen the construction and operation of the IFC consisting of five structures - three office buildings, the Conrad Hotel and a three-story underground shopping mall. Office tower one opened in October last year, followed by the IFC shopping mall in August and the Conrad Hotel earlier this month.
The occupancy rate of the 33-story office tower one has reached almost 100 percent. In contrast, the 29-story office tower two has only been able to fill 11 percent of its space with tenants, with the 55-story office tower three completely empty.
"Seoul City teamed up with AIG Real Estate in 2006 to erect the IFC in a bid to attract global financial services companies to Yeouido. But the project has been undergoing a harsh time since the collapse of Lehman Brothers in late 2008," said Real Estate 114 analyst Jang Yong-hoon. "The stagnant real estate market, corporate downsizing and other negative business conditions have made it difficult for the IFC to find tenants."
Additionally, many new office buildings have been constructed in downtown Seoul over the past few years, Jang said, adding the IFC will continue to face difficulty in leasing its office space.
AIG Real Estate admitted it has been struggling to lure companies to its newly-built offices.
"We are doing everything we can to find new tenants for office tower two and three against the ongoing property market downturn. We have been contacting a wide range of companies to persuade them to be part of the IFC family by offering lower rents and other favorable terms," said an official at AIG Real Estate who declined to be named. "Our rates are up to 15 percent lower than those of the finance center building in northern Seoul. So, we think many companies currently located in the Gwanghwamum area will come to IFC," the official said. "We are 100 percent sure that the IFC will fill up fast with hundreds of companies when the economy picks up."
Seoul City signed a contract with AIG Real Estate allowing the latter to use the IFC site for 99 years in return for paying annual rent. From 2006 to 2010, AIG did not pay rent but from 2011 through 2017, it is required to pay 1 percent of the site's appraised value.
In 2011, AIG paid 3.05 billion won and this year, Seoul City is expected to receive 3.2 billion won in line with a rise in property value.
AIG raised 1 trillion won from a group of 14 private businesses here and 454 billion won from abroad to construct the IFC.