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Logistics Marketbeat Report

Jinwoo Jung • 21/09/2022

Transaction Volume Recorded KRW3.1 Trillion in 1H 2022, Up 26% y-o-y, Driven by Mixed Centers

Transaction volume for logistics centers in the Seoul Capital Area (SCA) 1 recorded approximately KRW3.1 trillion in the first half of 2022, up 26% y-o-y. Notably, 10 of the total of 23 transactions (including four advance transactions) were mixed logistics centers with dry and cold facilities. Yongin Namsa mixed center, acquired by CJ Korea Express from Hangang Logis for KRW356 billion pre-completion, was the highest value transaction of the 1H period. Additionally, Rifa Asset Management completed the ownership transfer of Yangji mixed logistics center, purchased from Yangji Logistics for KRW262.4 billion pre-completion. As with these deals, mixed logistics centers offering both high profitability from cold facilities and solid demand for dry facilities are showing strength in the investment market.

New Logistics Center Supply of 1.56 Million Sq m Completed in 1H 2022, Mainly in East and West Submarkets

The total floor area of new logistics centers in the first half of 2022 reached 1.56 million sq m, predominantly in the East (0.75M sq m) and West (0.51M sq m) submarkets. In the East submarket, a total of 15 new logistics centers were completed, including four in Gwangju Opo Logistics Park (total 0.27M sq m) and the South Icheon logistics center of HanExpress. In the West submarket, six new centers were supplied, of which four were in Incheon. One of the representative centers is CBRE Investment Management ILC’s mixed logistics center located in Sinheung-dong 3-ga, purchased for KRW297 billion from KB Real Estate Trust, at which a major distribution company has leased the entire dry facilities floors. A second is South Cheongna Smart Logistics, a mixed center located in Seo-gu, which CMS Consortium sold to KORAMCO Energy REIT for KRW310 billion, with an e-commerce company leasing the entire space. Currently, there are a total of 26 logistics centers under construction in Incheon, with a relatively high proportion of cold temperature facilities. As centers with cold facilities have been supplied within a short period in line with the fast growth of the online food market, the importance of recruiting tenants with cold system demands will gradually rise.

Concerns Over New Supply Schedule Disruption Amid Rising Construction Costs

As of June 2022, new logistics centers totaling 19 million sq m of space have been approved, with 10 million sqm, around 53% of the total, having commenced construction. These projects are slated for the South (6.24M sq m), East (6.08M sq m), and West (5.55M sq m) submarkets. However, some construction work has been delayed due to issues including rising construction costs from inflationary pressures, more stringent safety- related regulations, and ex officio cancellation of projects adjacent to residential areas. Investors considering logistics center projects are advised to consider regional suitability in addition to effective access to residential areas.

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