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Logistics Marketbeat Report

Jinwoo Jung • 13/07/2023

Transaction Volume Recorded KRW3.2 Trillion in 1H 2023, 6 Deals Close on Advance Transaction Agreements 

Transaction volume for logistics centers in the Greater Seoul Area (GSA) recorded approximately KRW3.2 trillion in the first half of 2023, down 4% y-o-y, but the decline was mitigated by the closing of deals for logistics centers with advance transaction agreements. Despite the recent issue of defaulted advance agreements, six of the 12 logistics centers with a transaction volume of more than KRW100 billion were traded under advance agreements. One such was Cheongna Logistics Center, purchased by Brookfield Asset Management for approximately KRW659 billion from the developer KP Logistics PFV. The advance agreement was signed in the second half of 2020 with the transfer of ownership completed in February this year, following the completion of the logistics center in December last year.

New Logistics Center Supply of 3.11 Million Sqm Completed in 1H 2023, Notably at the South Submarket

The total floor area of new logistics centers in the first half of 2023 reached 3.11 million sqm, led by strong supply in the South submarket with approximately 1.26 million sqm. The South submarket supply in 1H 2023 more than quadrupled compared to the average half-yearly supply of 280,000 over the past three years (2020-2022). In addition to hinterland demand such as at Dongtan New City and Godeok New City, the South submarket is in high demand for large-scale logistics centers due to its ability to expand its transportation and delivery service area to the Greater Chungcheong Area. Three of 17 logistics centers supplied in the South submarket in 1H 2023 boasted GFAs of more than 165,000 sqm. Logispoint Pyeongtaek Logistics Center, at GFA of 199,762 sqm, recording the greatest floor area of all new supply in 1H 2023, will be leased by Kurly through 2023. The supply trend is expected to be strong in the second half of 2023, with more than 1 million sqm of logistics center space scheduled in the South, East and West submarkets.

More Logistics Centers Switching Design Format Over Cold Space Concerns

As leasing of cold space facilities becomes more difficult, coupled with concerns since 2022 around cold logistics centers oversupply, a growing number of logistics centers are switching areas planned for cold space into dry space. One such logistics center, scheduled to be supplied in Bupyeong-gu, Incheon, was issued a permit as an all-floor cold space, but before construction, the design was changed to one cold space floor and eight dry space floors. A second center under construction in Gosam-myeon, Anseong was permitted and commenced construction as a mixed dry and cold space logistics center, with three cold space floors and one dry space floor. However, the design ultimately changed to an all- floor dry space logistics center. Newly completed logistics centers and logistics centers where leases have expired have also been unable to find tenants for cold spaces, and are now looking to lease the vacant space as dry spaces. Cold spaces require capital investment on equipment as well as major operating costs such as insurance premiums, and hence it is important to secure long-term tenants and make timely decision when considering such a design change.


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