Self-Storage The number one provider in the country, Second Syndrome, received the Minister of Land, Infrastructure and Transport Award at the Urban Area Innovation Awards held last November. The Urban Area Innovation Awards, which is in its sixth year this year, is a prize established to encourage the achievements of local governments and private enterprises that have revitalized regions and achieved innovation through urban regeneration and strengthening the economic foundation.

This award is significant because it officially recognizes the contribution of mini-storage "Darak" to improving housing environments and urban development. Furthermore, it implies that Darak must play a more important role in bestowing new value upon cities and regions in the future. This article will examine self-storage from the perspective of urban regeneration, which aims to revitalize aging areas with government leadership.

< 2024 Urban Area Innovation Awards Minister of Land, Infrastructure and Transport Award / Source: Second Syndrome >

Definition and Purpose of Urban Regeneration

Urban regeneration is one of the major projects of the government and local governments. At the <2024 Urban Area Innovation Expo>, over 130 local governments and public institutions promoted their respective achievements in urban regeneration projects. It was impressive to see many local governments working hard to revitalize underdeveloped areas based on localized concepts.

Urban regeneration refers to projects aimed at revitalizing cities that have declined due to changes in population and industrial structure by adding new functions. The Special Act on the Promotion and Support of Urban Regeneration, enacted in 2013, defines urban regeneration as follows: "To revitalize cities declining due to population decline, industrial structure changes, indiscriminate urban expansion, and the aging of residential environments through the strengthening of local capabilities, introduction and creation of new functions, and utilization of local resources economically, socially, physically, and environmentally."

Ultimately, urban regeneration seeks to differentiate its approach from redevelopment that maximizes economic benefits. Its goal is to preserve existing buildings and revive cultural values, using public funds to induce change in areas where private-led redevelopment or reconstruction is difficult. This is mainly applicable in areas where the location, infrastructure, and scale are poor and the level of aging is serious, making it challenging for private investments.

Thus, urban regeneration has become a key tool of public policy that aims to respect the history and culture of local areas while improving the quality of life for residents and ensuring the sustainability of cities.

Changes in Korean Urban Regeneration Policy

Although the names and directions of policies have slightly changed over time, urban regeneration remains one of the core projects that occupy an important position in the government's real estate policy in South Korea. Let's examine how related policies have changed so far and what direction they are currently pursuing.

The need for urban regeneration began to be discussed on a small scale since the 2000s. This came as the rapid urbanization and industrialization of the 1990s led many cities to experience aging, with capacity limits and economic issues becoming more prominent.

With the enactment of the Urban Regeneration Act in 2013, a legal foundation for promoting urban regeneration was established. From this point, the need for development that preserves the local history and characteristics as much as possible rather than demolishing old buildings and constructing new ones began to emerge. A representative example is "Seongsu-dong", which transformed an old factory and warehouse into trendy cafes and galleries while retaining their original appearances.

< Representative Success Case of Urban Regeneration ‘Seongsu-dong Daelim Warehouse’ / Source: Seongdong-gu, Seoul >

Before: A shabby and old warehouse

After: Transformed into a trendy café

The government-led urban regeneration projects began to be actively promoted with the launch of the Urban Regeneration New Deal Project in 2017. It is a large-scale project with an investment of a staggering 50 trillion won over five years, transitioning from a centrally-led approach by the government to a method led by local governments that reflects the opinions of local residents. Since 2017 until last year, a total of 544 local governments have been selected as target areas, and projects such as the development of community facilities and tourist resources have been carried out.

In March of this year, the Ministry of Land, Infrastructure and Transport announced the "New: Village" project to improve aging single-family homes and villa villages. While previous urban regeneration projects focused on regional economic activities and tourism resources, the New: Village project puts more emphasis on improving the living environment of low-rise residential areas such as villas or single-family homes. The main goal is to expand resident convenience facilities such as parking lots and care facilities in densely populated low-rise residential areas that lack basic amenities, leading to low residential satisfaction.

This year, there are plans to select 30 regions and support up to 15 billion won per region, attracting high interest with 61 local governments applying.

< New: Village project concept proposal (example) / Source: Ministry of Land, Infrastructure and Transport >

Urban Regeneration Cases Created by Mini-Storage Darak

Mini-storage Darak is also contributing to urban regeneration. It assigns new functions to aging spaces that are difficult to use. It not only transforms underutilized urban spaces into areas that can generate profit but also contributes to improving the residential environment, allowing surrounding residents to live in larger spaces.

One prominent example is Darak’s branch near Yatap Station. This location utilizes the space of the Seongnam intercity bus terminal waiting room, which was closed due to decreased usage from the long-term impact of COVID-19. Following the sudden termination of operations, the terminal resembled a seemingly abandoned massive dilapidated building.

By introducing mini-storage Darak, the facility management company, which was struggling, has not only regained profitability but has also been reborn as a valuable space for small business owners and nearby residents to store goods.

Even today, if you visit the Seongnam Bus Terminal, excluding mini-storage Darak, the building's utilization rate is less than 30%. Despite being located in an inactive facility, Darak’s facility is utilized at over 90%, proving its effectiveness in urban regeneration projects.

Many people visit the terminal not to take a bus but to store their items at Darak. This is one of the representative cases where mini-storage Darak has bestowed new value on unused spaces.

< Waiting room of Seongnam Bus Terminal reborn as mini-storage Darak / Source: Second Syndrome >

Moreover, Darak has created meaningful cases in the New: Village project initiated by the Ministry of Land, Infrastructure and Transport. It has successfully transitioned three semi-basement homes in Seoul into self-storage facilities for local residents in collaboration with the Korea Land and Housing Corporation (LH).

As a government policy, semi-basement spaces that could not serve as housing have been excellently transformed into convenience facilities for storing the belongings of nearby residents. As the first step in this project, success was achieved in transforming three semi-basement homes in Seoul into mini-storage Darak facilities (located at Ttukseom Station, Dunchondong Station, and Pungnap).

< Mini-storage Darak in semi-basement homes initiated in collaboration with LH / Source: Second Syndrome >

As it is the first case attempted in the country, the process has not been smooth. Since it is a public task, it prioritized public interest over profit, and it was essential to meet the user experience of Darak in semi-basement homes.

It needed to relocate residents and utilize the remaining space, but local community and care facility candidates often proved difficult to establish in semi-basement facilities. However, self-storage, which is infrastructure where goods, not people, reside, could accommodate these characteristics, and collaboration was achieved with Mini-storage Darak, a leading domestic company that has created numerous restructuring projects.

Initially, discussions focused on merely installing simple storage units, but it was anticipated that without an operating entity, even with remodeling, facilities would be liable to neglect due to aging. This would contradict the original purpose of urban regeneration for local residents. Additionally, concerns arose about potential damage to stored items from the semi-basement setting and whether the operation of facilities might harm residents.

Therefore, not only was the facility created, but Darak’s automated operational technology, which allows for continuous management in the future, was applied. As a result, the dark and damp semi-basement homes transformed into comfortable storage facilities for residents, contributing to the community through sustained management. This meaningful case of public-private cooperation in urban regeneration was born through the desirable synergy of public institutions and active industry players. It is expected that additional discussions will continue with local governments, which are interested in urban regeneration.

The Role of Self-Storage in the Expanding Urban Regeneration

Urban regeneration aligns with real estate investment strategies such as Value-Add and Opportunistic in the sense that it develops undervalued, poor-quality properties. In advanced countries that have experienced changes in economic structure before us, there are many cases of transforming defunct buildings into self-storage.

Representative examples include SHURGARD in Germany, which utilized defunct factories due to changes in the local economy, and boxfill in the UK, which transformed unused railway arch spaces into self-storage. Boxfill, in particular, is an exemplary case of successfully converting spaces that could otherwise be used for homelessness or crime into self-storage. This is similar to how Darak transformed an unused intercity bus terminal into self-storage.

< Self-storage facilities utilizing unused real estate / Source: Company websites >

Domestic urban regeneration can be seen as a structure where the government bears the investment risks for development rather than companies. Looking at the direction of policies, it seems that self-storage will play an increasingly important role in the future in South Korea. This is because the goals pursued by urban regeneration closely align with the contributions that self-storage can provide. The reasons why self-storage is suitable for improving the residential environment in aging low-rise residential areas currently being pursued by the government can be summarized in three points:

First, self-storage is a service that can contribute to the actual improvement of residential environments for residents. Despite having low housing costs, low-rise residences such as single-family homes and villas are becoming less popular. As of the first half of this year, the share of low-rise residences in housing transaction volumes was less than 15%, hitting a record low, and the supply is also on a decline.

< National non-apartment supply performance / Source: Ministry of Land, Infrastructure and Transport >

One of the reasons for this decline in demand is the inconvenience caused by small residential areas. Consequently, the need for outsourcing space has inevitably increased. The significantly high occupancy rates for mini-storage Darak located in old homes and villa villages support this.

< Reasons for dissatisfaction with residential properties / Source: Trend Monitor >

Second, self-storage offers the advantage of being operable in various locations and environments. Due to the nature of service in which goods reside, there are fewer restrictions regarding location and environmental conditions compared to other industries. In addition, Darak can utilize its extensive experience in operating multiple locations and IoT technology to establish automated unmanned solutions. This allows for low-cost management with no need for resident staff, ensuring sustainable facility operation.

Finally, self-storage provides positive effects from an ESG perspective. By offering space for storing unnecessary possessions, it enhances the efficiency of resources and contributes to reducing discarded consumer goods. Moreover, self-storage has lower energy consumption and carbon emissions compared to services that require frequent human access. All branches of mini-storage Darak maintain only the optimal environment necessary for storing items while maximizing energy efficiency.

In conclusion, self-storage could serve as an efficient solution that meets the primary goals of urban regeneration: improving the actual environment of low-rise residential areas, flexible location conditions, and enhancing sustainability.

So far, we have explored the possibilities of urban regeneration led by government projects and the utilization of self-storage. In the future, the influences of low birth rates and aging populations will lead to an increase in declining urban areas. As growth potential is limited due to population decrease, the importance of urban regeneration that maximizes the use of existing facilities over comprehensive redevelopment, which requires significant costs and resources, is expected to become more apparent. As discussed previously, self-storage equipped with automated operational technology seems to have many roles it can undertake in urban regeneration projects.