Large supply prompts solid net take-up

• In Q2 2024, overall net absorption in the SCA reached 147,816 pyeong. The quarter saw a balanced mix of new leases from both existing and new centres across various sectors, such as 3PL, consumer electronics, e-commerce and furniture.
• Only the Central submarket saw a slight decline in net absorption, while the North stayed quiet. The South, which witnessed the highest supply in H1 2024, observed the largest net absorption, aided by new leases by e-commerce and 3PL companies.

The overall SCA occupancy declines as new centres come on-stream

• During the quarter, a total of 13 new centres were added to the market. The South introduced five new centres, the West also welcomed five and the South-east had three. In terms of area, the West accounted for 47.2% of the new quarterly stock.
• The vacancy rate in the SCA market reached a historic high of 18.0%, representing a 257 bps increase q-o-q. All other submarkets experienced a slight rise in vacancy rates except for the North, where there was no change.

Investors await distressed sales opportunities

• Overall net effective rent in the SCA rose by 0.8% q-o-q to KRW 30,946 per pyeong per month. Rents increased in all submarkets except for the West. Some centres in the West offered lower rents than the market average, given their inferior locations.
• The logistics investment market in Q2 2024 recorded KRW 1.3 trillion, marking a 68% increase q-o-q but a 16% decrease y-o-y. The most notable deal was Seoknam Innovation Logistics Center, which was transacted for KRW 585 billion.

Outlook: More construction permits expire as developers cannot secure financing

• Due to financial market instability and high construction costs, only five projects broke ground in H1 2024. The number of expiring construction permits is expected to grow. However, the injection of new supply will be moderated from 2025.
• The logistics transaction market is likely to remain subdued due to discrepancies in expected prices. Nonetheless, we expect an increase in investments targeting distressed properties, particularly those that are unable to extend PF-loan maturities.