Transaction Volume Recorded KRW2.1 Trillion in 2H 2022, Down 54% Y-O-Y, Demand Steady for Dry Spaces
Transaction volume for logistics centers in the Greater Seoul Area (GSA)1 recorded approximately KRW2.1 trillion in the second half of 2022, down 54% y-o-y. The full-year volume fell by around 21% from KRW7.2 trillion in 2021 to KRW5.6 trillion in 2022. The volume of logistics center transactions, which had steadily grown, shifted downwards for the first time since 2015 in line with global economic issues. Of a total of 15 logistics centers that closed transactions in 2H 2022, seven were dry-cold mixed centers and seven were pure dry centers, while just one was a pure cold center, confirming that dry space is still in high demand. GREY BOX Ansan logistics center located in Danwon-gu, Ansan-si was the highest value transaction of the 2H period. KB Asset Management completed the purchase from Banwol Smart Logistics PFV for KRW330 billion in August 2022 after signing an advance transaction agreement in 2021.
New Logistics Center Supply of 1.75 Million Sqm Completed in 2H 2022, Notably at Incheon North Port Hinterland
The total floor area of new logistics centers in the second half of 2022 reached 1.75 million sqm, predominantly in the West (0.74M sqm) and East (0.63M sqm) submarkets. In the West submarket, five logistics centers were newly built at Incheon North Port Hinterland, maintaining the strong supply trend from 1H 2022. One representative center is the Cheonna Logistics Center (GFA 431,253 sqm), the largest-scale facility among newly supplied logistics centers in 2H 2022. As 12 logistics centers are scheduled to be completed in the area in 2023, supply will be sustained in the West submarket. In the East submarket, which has excellent access to Jungbu Expressway, a total 11 new logistics centers are all large-scale, at more than GFA 33,000 sqm, to meet demand for logistics hub from 3PL companies. The largest-scale logistics center supplied in the East submarket was Yongin Namsa center, and CJ Korea Express is developing it as a smart fulfillment space by applying high-tech equipment and systems such as robots. Some completion delays experienced in 2022 will contribute to a stronger new supply pipeline in 2023.
Transaction Cancellations Emerge, Design Quality Set to Determine Investment Demand
As the commercial real estate market slowed due to rapid interest rate hikes, some purchase and sale contracts were canceled in the period. A major asset management company withdrew its plan to sell a large logistics center in Seo-gu, Incheon, while a buyer canceled a conditional purchase contract for the completion of the cold unit at a logistics center in Yeoju, at which Coupang rents the dry unit. With transaction volume expected to drop in the short-term, investment demand will be concentrated on logistics centers with tenant-preferred designs and locations. With growing interest in electric vehicle delivery, and automation systems, designs that offer electrical power networks sufficient to support electric vehicle charger and automation system installation are now in the spotlight.
