The K-wave calls for production studios in Korea
Korea is fast becoming a cultural powerhouse producing numerous K-contents, spurring demand for modern large-scale production studios.
With the rising popularity of “K-wave” dramas, movies and pop, demand for production studios is growing continuously in Korea. The phenomenon of the Korean Wave (K-wave) or Hallyu relates to the global popularity of South Korean culture, which has dramatically risen since the 1990s. Currently, a number of existing production studios are managed poorly and lack essential amenities and features. The production studios are expected to entice strong interest from developers exploring alternative sectors to gauge opportunities.
Demand for Production Studios
According to the Ministry of Culture, Sports and Tourism, the annual revenue of the content business is on the rise, demonstrating a CAGR of 5% from 2017 to 2021. Notably, cartoon, content solution, music and game genres saw double-digit growth in CAGR. The movie business tumbled in 2020 amid the pandemic but is regaining momentum.
Table 1: Annual Revenue of Contents Business
|Unit: KRW 1 billion|
Source: Ministry of Culture, Sports and Tourism
Additionally, there has been an emergence of subscription-based over-the-top (OTT) media and video-on-demand (VOD) in Korea. The sales revenue of the Internet VOD movie market in South Korea increased from KRW 106.7 billion in 2021 to KRW 169.9 billion in 2022 (Statista). Netflix also announced its biggest-ever slate of Korean content in January 2023 in response to a surging VOD market in the country.
Considering the lack of self-use studios to film despite the bullish demand, more broadcasting companies need private studios operated by third parties. Some are utilising factory land sites or logistics facilities to meet the demand.
Requirement for high-quality production studios
The flight-to-quality is also observed in the production studio sector. The occupants strongly prefer larger, tech-savvy and customised studios to shoot different types of content. Content makers are ardently seeking more advanced features such as soundproof material, HVAC, or infinity walls.
Depending on the type of content, requirements by tenants vary considerably. For instance, drama sets require proximity to broadcasting companies to edit films quickly and offer shorter commute times for actors. On the other hand, the requirement for movie sets may not emphasise locations as much. However, the facilities often need a clear ceiling height to film motion-based scenes. They should also be able to accommodate customised requests, such as installing a water tank to film underwater. The occupants also prefer other pre- and post-production features such as editing rooms, resting zones, convenience stores, practice studios, make-up rooms and customisable dubbing booths with soundproof panels.
Ideally, production studios having at least three different types of studios with a minimum GFA of 1,000 pyeong, located within an hour’s radius from the broadcasting companies, offering high-spec lighting, sound-dampening walls and other amenities, are perceived to be competitive assets.
Going forward, developers are anticipated to gauge this opportunity to redevelop underperforming industrial assets or land sites to construct modern, high-spec production studios. While attractive net operating income (NOI) may be achieved, the main differences with other industrial assets include short-lived lease terms, which can be several months and customised requirements.