Large net absorption takes place, primarily in recent completions

• In Q1 2025, the net absorption in the SCA market recorded 154,400 pyeong, exceeding the quarterly new completion volume by 31%. All submarkets demonstrated positive net absorption, with only the North showing a minimal negative net absorption.
• New tenants from 3PL, e-commerce and F&B sectors signed leases in the quarter. Notably, 86% of newly leased space occurred in centres completed in the past two years. The West, which had the most supply in 2024, recorded the highest net absorption of 71,600 pyeong.

Supply plummets; vacancy rates follow suit in a positive market shift

• Five logistics centres were completed, with three in the South and two in the North. The West and South-east, which recorded the most supply in 2024 and 2023, respectively, had no new supply. Notably, the South saw zero supply for the first time in 16 quarters.
• The SCA vacancy rate fell 154 bps q-o-q, reaching 16.5%. The North and South – the only two submarkets introducing new supply saw increases in vacancy rates, while others observed decreases. The West’s vacancy rate contracted for the first time since Q4 2023.

SCA logistics cap rate hits 5.3%, down for the second straight quarter

• The SCA overall net effective rent increased by 0.5% q-o-q, reaching KRW 31,600 per pyeong per month. All districts experienced rent increases, with the West showing the highest growth at 1.2% q-o-q. In response to inflation, several centres also raised CAM fees by KRW 500 to 1,000.
• The logistics investment volume totalled about KRW 1.3 trillion, representing a 65% increase q-o-q. The most notable transaction was the GreenWave Sihwa Logistics Center, sold by Sihwa Road to JB Asset Management, with GIC participating as an investor.

Outlook: Logistics centre supply in 2025 is forecast to reach only 36% of 2024 levels

• For the remainder of 2025, less than 300,000 pyeong of supply is expected, which should gradually alleviate concerns about oversupply. Amid a notable decline in construction starts, the number of projects with expiring permits is also expected to continue increasing.
• As interest rates decline from their peak, market expectations grow for improved liquidity. Despite the economic downturn from tariffs and political variables, investment demand for core logistics centres is expected to remain solid, supported by sharp supply decreases.