Seoul to see 1.5 million pyung of new logistics centres by end-2022

These will be concentrated in the South-east and the West sub-markets. 

Overall net absorption in the Seoul Capital Area (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.