APPD Market Report Article

Seoul

February 28, 2022

0.5%

KRW 29,397

Growth
Slowing

Amid scarcity of stock, new centres welcome tenants quickly

  • Overall net absorption in SCA recorded 119,814 pyung on the back of bullish demand from 3PL and e-commerce players. Notably, the West sub-market’s net absorption reported the largest uptick, posting 68,013 pyung. The South-east submarket also observed strong net take-up of 50,712 pyung.
  • In the West submarket, Youngjongdong Airlines Logistics Center signed a new leasing contract (about 17,900 pyung) with an e-commerce tenant, eliminating all vacant space in the centre. A 3PL tenant pre-leased a newly constructed centre in the South-east submarket, Daeshin GLS Logistics Center (about 11,420 pyung), taking up the entire space.

Five new centres come onstream in the South-east and the West

  • In the South-east, Daeshin GLS Logistics Center (GFA 11,420 pyung) was completed in Yeoju. Coway Logistics Center (GFA 13,096 pyung), Icheon Songon-ri Logistics Center (GFA 15,288 pyung), Gobaek-ri KCTC Logistics Center (GFA 9,312 pyung) were added to the Icheon basket. In addition, in the West submarket, Aster Hangdong Logistics Center (GFA 73,566 pyung) was completed in Incheon.
  • Overall vacancy rate rose to a meagre 1.8% from 1.7% q-o-q. The Central’s vacancy rate stayed unchanged and the North boasted full occupancy. The South and South-east vacancy rates decreased marginally q-o-q. Notably, all new centres completed in South-east in 4Q21 were fully occupied. The West’s vacancy rate saw a small uptick from the departure of e-commerce and 3PL tenants.

Overall transactions achieve the highest quarterly volume in 2021

  • Overall net effective rent posted KRW 29,397 per pyung, down by 0.3% q-o-q, which was largely due to new centres in the South-east. The centres in the South-east have comparatively lower rent, dragging down SCA overall rents. By submarket, rents stayed practically flat except in the South. The South’s rent increased by 1.2% q-o-q.
  • Overall transaction volume marked about KRW 7.3 trillion. The most notable transaction was Kendall Square REITs portfolio (Anseong 2, 3, 4 Logistics Center, Icheon 5, 6 Logistics Center, Gimhae Logistics Center), totalling about KRW 790 billion. ADF Asset Management (GIC) pre-purchased Aster Logistics Center in Incheon from Aster Development for about 585 billion.

Outlook: Many high-quality logistics centres will be supplied in 2022

  • By end-2022, logistics centres with a total GFA of around 1.5 million pyung are slated for completion. The majority of upcoming stock will be concentrated in the South-east and the West sub-markets. Inevitably, vacancies will rise. As scarcity of stock will be resolved to some extent, discrepancies in sales prices between Grade A and non-Grade A assets could widen.
  • Given heightened safety guidelines, ESG will become more important when it comes to project financing as well as lease marketing. As a result, more centres will strive to gain sustainability-related certifications such as LEED.

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

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