Seoul’s logistics transaction volume hits a record US$1.5b in Q2

This represents a 58% QoQ increase.

Overall net effective rents in the Seoul Capital Area (SCA) inched up 0.2% to KRW 29,480 per pyung per month in Q2. According to JLL, the Central and North submarkets’ rents stayed flat while the West, South-east and South submarkets’ rents slightly decreased. New stock in the West marginally lifted SCA rents as centres in the submarket tend to have higher rents due to the proximity to Seoul.

“Overall transaction volume marked around KRW 1.7 trillion (approx. US$1.5 billion), up by 58% q-o-q. This quarter’s most prominent transaction was Songdo H Logistics Centre; Shinhan AIM pre-purchased the asset from Wonjin Logistics for about KRW 403 billion. In addition, Hana Alternative Asset Management pre-acquired Greybox Logistics Centre in the West submarket from KB Asset Management for about KRW 320 billion.”

Here’s more from JLL:

Leasing demand continues to be robust

Overall net absorption in the SCA recorded 129,000 pyung on the back of robust leasing demand from 3PL and e-commerce tenants. Notably, net absorption in the West submarket increased the most, posting 70,900 pyung.

Notably, the West submarket witnessed buoyant leasing activity in newly completed centres. In the South submarket, e-commerce tenants expanded into space within the centre, lowering the vacancy.

Five new centres come onstream in SCA

L2 Logistics Centre Goan-ri Bld A and Icheon Daedae-ri Logistics Centre were added to the South-east basket, adding GFA 30,000 pyung in total. In the West submarket, Incheon Triport Logistics Centre (GFA 24,400 pyung) and Songdo H Logistics Centre (GFA 44,800 pyung) were completed. In addition, Iljuk Logistics Park (Lot-C) (GFA 19,200 pyung) was added into the South submarket.

Overall SCA vacancy rate tumbled from 3.4% to 2.8% q-o-q. All submarkets’ vacancy rates decreased and the North maintained its full occupancy. The Central submarket’s vacancy rate posted 3.4%, while the South submarket’s vacancy rate recorded 2.4%. South-east vacancy contracted to 1.3% q-o-q. The West submarket’s vacancy rate dropped to 5.6% in the quarter.

Outlook: Fierce competition in e-commerce bolsters demand

Due to the recent fire accident at Coupang Deokpyeong Logistics Centre, it is expected that it will be more challenging to obtain a construction permit for the logistics centre in SCA. In addition, insurance premiums at logistics centres are expected to sharply increase, and the logistics centre’s cap rate is expected to be under pressure amid intensified competition in acquiring assets.

Shinsegae Group has strengthened its online shopping sector through Emart’s acquisition of eBay Korea, which will increase overall logistics traffic. Leasing demand from Shinsegae is speculated to surge as the company aims to win e-commerce market share. 3PL and e-commerce players will continue to drive the demand.

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