Housing prices are soaring, but homes are getting smaller. Single-person households live in studio apartments measuring just 33 square feet (10 pyeong), moving is becoming more frequent, and balconies and utility rooms are overflowing with unused items. It's commonplace to see several million won worth of items piled up in a space worth 40 million won per pyeong.
In 2016, Hong Woo-tae, CEO of Second Syndrome, began solving this problem with "outsourcing space." He envisioned a space accessible 24 hours a day, with temperature and humidity controlled, and operated unmanned. This "mini-storage attic" separates the storage function from expensive homes, providing a separate space like an external hard drive.
Celebrating its ninth year, Second Syndrome has pioneered the Korean self-storage market, operating over 200 locations nationwide. It aims for an IPO in 2028.
The need for space redistribution
Before founding his own company, CEO Hong Woo-tae worked as an analyst at Mirae Asset Securities, where he observed structural changes in the macroeconomy and real estate markets. What caught his eye was the fact that while income growth was not keeping pace with real estate prices, the need for comfortable living spaces was growing.
"Housing costs continue to rise, but the living space people can actually enjoy is actually shrinking. From an analyst's perspective, this structure is not a temporary phenomenon, but a structural problem rooted in wealth redistribution."
I predicted that the imbalance between residential environments and living spaces would worsen in the future, and I was confident that an industry addressing this issue through the reallocation of space would inevitably grow. While this was a novel concept in Korea at the time, self-storage had already become a large-scale industry in the US and Japan.
"In the US, it began in the 1960s, and in Japan in the 1990s. Since the 2000s, it has emerged primarily in developed Asian countries, with urbanization rates exceeding 80% and incomes exceeding $30,000. In Korea, the income requirement was met in 2017, roughly coinciding with the emergence of the attic."
CEO Hong Woo-tae viewed Mini Warehouse Attic not as a simple unmanned startup item, but as the starting point of a living infrastructure industry based on macroeconomic changes.
Flexible space options realized with 'space intelligence'
The essence of the loft lies in its flexible spatial options. To provide people with the value of flexible space, we needed a comfortable, home-like environment, accessible whenever and wherever they wanted.
“To create a ‘personal space’ that can be used conveniently at any time without worrying about what others think, we have applied space intelligence technology to the attic.”
Space Intelligence is Darak's proprietary operational technology that connects spaces with digital management systems using AIoT devices and edge computing. This allows the facility to operate 24/7, maintaining stable temperature and humidity levels and security without the need for a single operator. Customers can utilize Darak's facilities as if they were their own, via a mobile app, without being constrained by operating hours or having to worry about operator supervision.
Initially, the concept of using a separate space was unfamiliar. Even when we created flyers with photos of the facility and distributed thousands of them, there was no response. However, with rising housing costs and rising incomes, the desire for space grew. As word of mouth spread among customers who had used the attic, awareness of the service began to grow.
"Customers who experienced the attic often said, 'The storage is so clean.' In a clean space, even my precious belongings can be safely stored. That was the moment when people realized the utility of the attic."
Cremation into 200 branches
Second Syndrome operates over 200 branches nationwide with a team of 35. Darak is a space subscription service where customers pay a fixed monthly fee via credit card. The average customer stays for over a year, and over 10% of customers remain customers for three years or more.
"Once you experience flexible space options, the benefits are so significant that the period of use inevitably increases. In Japan, it's common for people to start using a space in their 30s and continue using it for over 30 years, until they reach their 60s."
This creates a virtuous cycle where customers can experience the benefits of long-term space options, and companies can use the stable cash flow to develop better services.
Moreover, the attic's spatial model possesses defensive characteristics. Satisfied customers have a low churn rate, and its unmanned, automated operation means it is immune to cost factors like labor costs.
"In fact, even during the pandemic in 2020 and the interest rate hike in 2022, Darak's facility expansion and sales growth continued unabated."
Recently, demand for storage units in multi-family housing, such as apartments and rental housing, is rapidly increasing. Starting in 2028, Darak will also supply storage units to GS Zai Apartment community facilities. A new B2B market for improving residential living is emerging.
Second Syndrome has attracted a total of 17 billion won in equity investment through its Series B bridge round. The company's scalability and cash-generating capabilities, coupled with its flexible space options, have been recognized early on by venture capitalists and strategic investors.
"Now, as our role as a leader in the self-storage sector in the real estate capital market grows, we are also responsible for managing the asset management company's 50 billion won in funds."
Recently, the National Pension Service, considered one of the world's top three pension funds, issued guidelines requiring that at least 30% of its real estate assets be invested in new economy assets. The statement explained, "Self-storage is included in this new economy category, and Darak, the market leader, is the only operator participating."
"The reason we were the only company in Korea selected by institutional investors was because of our operational capabilities, backed by technological prowess. We created a space that is both cost-effective and comfortable for everyone, through online and offline integration, the introduction of AI technology, and a data-driven operating system."
The secured capital will be utilized in two directions. First, large-scale loft development at the building level. While previously, the project primarily involved converting idle urban space, the company plans to fully embrace this approach by developing entire buildings into lofts, maximizing economies of scale.
Second, we are accelerating our overseas expansion. We are already in detailed discussions with major Japanese real estate companies, who are showing keen interest in Darak's technological excellence and operational automation system.
Second Syndrome's competitive advantage lies in the vast operational know-how and data accumulated through operating over 200 branches.
"Design standards that assume the potential for actual accidents like water leaks, condensation, fire, and security issues, operational processes focused on preventative measures, and systems that enable immediate response when problems arise are not areas that can be replicated in a short period of time."
The key point is that operational efficiency improves as scale increases. Because Darak has developed its own AI- and IoT-based operations management system, the increase in branch locations doesn't necessarily translate into a corresponding increase in personnel or operational resources. Indeed, once a certain scale is reached, a structure is created that simultaneously improves operational efficiency and profitability.
“Anyone can run one or two facilities, but scaling to dozens or hundreds of facilities requires a solid foundation in all three areas: expansion, construction, and operations to deliver excellent service.”
Second Syndrome was the first in Korea to formalize the self-storage industry through a sandbox. As a result, the Ministry of Land, Infrastructure and Transport established a new use for shared storage facilities under the Building Act. This established a formal institutional foundation for the self-storage industry.
Established as a lifestyle
The customer base for lofts is evolving. Initially, lofts were used for essential purposes: when moving dates didn't work out, for interior renovations, or when space was limited due to a cramped home or office. Now, they're no longer just a necessity; they reflect a lifestyle.
"Customers who used to use attics because their homes were small now also use them in apartments measuring 50 pyeong. This is because they want to separate their private space from their families."
A significant number of customers even send packages directly to their attics. E-commerce businesses also utilize attics. With rising incomes and the rise of the era of hobbies, many people are using attics to store their hobbies, such as camping, golf, plastic models, and sneakers, as well as personal collections. It's not uncommon to see military personnel and fan clubs sharing attics.
Self-storage is fundamentally a service that provides flexible space options to compensate for the high cost of housing. With the ongoing structural changes—the increase in single- and two-person households, shrinking residential space, and a shift toward a rental-centric market—this role is increasingly becoming a necessity rather than an option.
Second Syndrome's founding vision was clear from the beginning: to become a company that helps everyone enjoy the second life they desire, beyond the first life where they fulfill the roles society demands.
"Second Syndrome's direction for the next five to ten years is clear. Rather than remaining a self-storage business, we will provide people with more flexible, valuable, and diverse space options."
Mini Warehouse Attic plans to transform physical space into a cloud by integrating advanced digital technologies with logistics solutions. It will also evolve to store personal belongings within this cloud. This will complete the digital version of our living infrastructure.
In addition, we plan to maximize our value as a space builder that designs and operates spaces for the public's lives, based on the operational capabilities based on space rebuilding technology we have accumulated so far.
"If you're concerned about your home or office space, I have this to say: We can provide you with an external hard drive that you can use as comfortably as your own home, whenever and however you need it. Enjoy a flexible lifestyle with Darak, and live the lifestyle you desire."
What CEO Hong Woo-tae is creating is a flexible space option that separates storage from expensive homes, offering it as an external hard drive. Unmanned operation powered by space intelligence technology, stability secured through expertise in operating 200 branches, and a trusted living infrastructure that even manages National Pension Service assets. This is the future of space envisioned by Second Syndrome. The era of accumulating millions of dollars worth of items in a 40 million won per pyeong home is over. Now, we have entered an era where space can be used flexibly, like an external hard drive.
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