APPD Market Report Article

Seoul

December 1, 2021

0.8%

KRW 29,487

Growth
Slowing

Overall net absorption remains positive with robust leasing demand

  • The 3PL and e-commerce tenants continue to lead the demand, driving the quarter’s positive net absorption of 69,000 pyung. Notably, the South East submarket’s net absorption observed the largest uptick, recording 54,800 pyung.
  • In the South East submarket, a 3PL tenant fully leased West Icheon BRIC Logistics Center (10,300 pyung), a new centre completed in 3Q21. Another newly constructed centre, Sogori Chaeum Icheon Logistics Center (about 11,700 pyung), signed leases with e-commerce, 3PL and retail tenants before completion.

Four new centres come onstream in the South East submarket

  • In Yongin, ADF Yongin Namsa-myeon Buk-ri Logistics Centre (GFA 23,900 pyung) was completed. SK Networks Logistics Centre (GFA 16,100 pyung, owner-occupied), Sogori Chaeum Icheon Logistics Centre (GFA 11,700 pyung) and West Icheon BRIC logistics Centre (GFA 10,300 pyung) were added to the Icheon supply basket. No new supply was witnessed in other submarkets.
  • Overall SCA vacancy rate tumbled from 2.7% to 1.7% q-o-q. The Central, South East and West submarket vacancy rates decreased while the North continued to boast full occupancy. The South’s vacancy rate rose slightly as 3PL tenants moved out. The South East’s vacancy rate contracted to 0.3% despite the new supply.

Investment appetite remains healthy with many forward sales

  • In the quarter, overall SCA net effective rent posted KRW 29,487 per pyung per month, down by 0.1% from 2Q21. Rents in all submarkets stayed virtually flat. The average rent in the South East, where new centres came onstream this quarter, is lower than that of other submarkets, thereby marginally dragging down the SCA average rent.
  • Overall transaction volume marked about KRW 1.3 trillion. The most notable transaction was BlueCove Asset Management portfolio (CJ Goyang Samsung Logistics Centre, Ogeum-dong Logistics Centre), totalling about KRW 400 billion. CapitaLand pre-acquired two food logistics centres from VIC Partners for about KRW 120 billion.

Outlook: Influx of new centres may be delayed to some extent

  • With recent fire accidents in logistics centres, local governments are re-examining safety regulations and procedures. As a consequence, receiving new construction permits could be postponed to some degree. In addition, the recent spike in construction material prices and insurance fees could act as a headwind, slowing down the completion of new supply.
  • Many upcoming logistics centres in the pipeline are comprised of both dry and cold facilities to offset high land costs, as well as to improve profitability. On the back of brisk leasing demand in the dry storage sector, the dry portion is expected to resolve vacancy quickly, while cold storage portion is anticipated to require more time to lease due to weaker demand.

Note: Seoul Industrial refers to Seoul Capital Area's prime logistics market.

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