Korea total logistics stock reaches over 35m sqm in 2023

Majority of the gross floor area is in the Seoul Metropolitan Area.

According to a Savills report, based on logistics centers exceeding GFA 16,500 sq m nationwide, new supply added in Korea during 2023 was 7.24 million sq m, an increase of approximately 25% year-on-year, bringing the total stock to 35.67 million sq m by year-end. 

In the Seoul Metropolitan Area (“SMA”), which accounts for 77% of total GFA, 5.91 million sq m was newly supplied in 2023, contributing to a total stock of 27.4 million sq m as of December 2023, with 94% of the SMA’s total GFA concentrated in the three major districts of the Southeast, Southwest, and South Central. 

Here’s more from Savills:

The Southeast (Icheon, Yongin, Yeoju, and Gwangju) had the highest supply of 1.99 million sq m among districts, bringing the total to 10.87 million sq m. The district has a substantial locational advantage, strategically positioned along the route from Busan Port, which manages 77% of the nation’s container cargo volume, to residential complexes in Seoul and the metropolitan area. As a result of this strategic positioning, the district is highly sought-after and favored as a logistics hub by industries including 3PL, e-commerce. 

The Southwest (Incheon, Ansan, Gwangmyeong, Gimpo, and Goyang) contributed supply of 1.81 million sq m in 2023 to a total of 7.24 million sq m in the SMA, accounting for 26.5% of the total across the SMA. Notably, cold storage comprised 36% of total new supply, a 6% increase compared to 2022. Due to its advantageous proximity to densely populated residential areas such as Seoul, Incheon, and Gimpo, the Southwest region serves as a crucial last-mile hub, commanding relatively higher rents.

However, in Incheon specifically, where large-scale logistics centers with high-rise structures up to a maximum floor area ratio of 400% have been predominantly supplied, there are limitations to demand growth relative to center supply. This is due to challenges associated with high-rise centers, such as inefficient vehicle routes, and the comparatively lower volume of cargo traffic at Incheon Port, only 11.5% of the country’s total container traffic, compared to Busan Port. 

The South Central (Anseong, Hwaseong, Osan, and Pyeongtaek) mirrored the scale of the Southwest District with a supply of 1.81 million sq m, comprising 24.5% of total stock in the SMA. This marked a 1.7% increase from the previous year. Similar to the Southwest, the South Central region witnessed a rapid rise in the proportion of cold storage supply, heightening the risk of vacancy. However, despite the significant supply, new tenant demand remained relatively steady due to the region’s strategic proximity to key highways such as the Gyeongbu, Jungbu, and Pyeongtaek-Jecheon expressways, as well as industrial complexes. 

The Northeast (Namyangju, Guri, Yangju, Uijeongbu, Pocheon) is characterized by a high demand for logistics centers, particularly as last-mile logistics hubs due to its concentration of new towns and residential complexes, and the workforce. However, the district faces challenges in new logistics center development due to various development regulations such as Water Source Protection Zones and Development Restriction Areas, alongside opposition from local residents. The stock for the district amounts to 320,000 sq m, representing 1.2% of total in the SMA. Compared to other districts, new supply is significantly lower, which contributes to rapid stabilization upon completion. 

Challenges in the development environment, including high interest rates and construction costs, are anticipated to persist in 2024. Supply volumes, which have been steadily rising since 2020, are expected to decline after reaching a peak in 2023 due to uncertainties in the supply landscape, such as stricter regulations on new construction permits in the SMA and vacancy risks.