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A Study on Tenant Improvement in Seoul Office Market

  • Korea Real Estate Review
  • 2020, 30(4), pp.17-32
  • DOI : 10.35136/krer.30.4.2
  • Publisher : korea real estate research institute
  • Research Area : Social Science > Law > Law of Special Parts > Law of Real Estate
  • Received : October 14, 2020
  • Accepted : December 11, 2020
  • Published : December 31, 2020

Cho, Hoon Hee 1,  Chang Gyu Choi 1

1한양대학교

Accredited

ABSTRACT

TI is an effective rent support method in which the landlord provides the tenant an allowance for improvements to the office interior. Despite the growing popularity of TI in Seoul office market, there has been no attempt to collect data and study the phenomenon. This study documents the practice of TI, rent free and fit out arrangements. As of the fourth quarter of 2016, 19 buildings were confirmed to provide TI. All of them were large, relatively new buildings with expensive rents, high management and utility costs, and a high vacancy rate. We have conducted simulations for lease arrangements with varying provisions for rent free, fit out, and TI. The results suggest that the most effective support scheme for the landlord entails rent free and TI in the form of a cash payment towards the cost of building construction, and subsequently depreciated annually by the landlord. On the other hand, the most effective support scheme for the tenant consists of rent free and TI from the landlord, with the TI amount given in cash as an asset of the tenant and depreciated annually.

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