SUPPLY

The surge in online shopping and a corporate presence in the retail and distribution sector has led to a significant increase in the construction of logistics centers since 2020. In the Seoul Metropolitan Area ("SMA"), the annual number of permits for logistics centers with a GFA exceeding 16,500 sq m averaged 26.5 between 2013 and 2019. However, from 2020 to 2022, this figure rose to 119, an increase of 4.5 times. This accelerated development resulted in the SMA's logistics area expanding to 3.9 million sq m in 2022 and further escalating to 4.28 million sq m in the first three quarters of 2023, nearly three times the average annual figure of 1.4 million sq m recorded in the SMA between 2013 and 2021.

As of Q3/2023, logistics centers exceeding 16,500 sq m in the SMA totaled 25.76 million sq m of GFA (488 units) – about five times larger than the cumulative supply of 5.44 million sq m at the end of 2013. Furthermore, the growth of the fulfillment industry has led to an enlargement in logistics center size, with the average GFA increasing from 35,100 sq m in 2013 to 51,700 sq m in 2023, marking a growth of approximately 47%.

Around 2020, heightened demand for fresh produce including beverages, groceries, and meal kits, coupled with the expansion of early morning delivery services, led to a notable increase in both the supply and demand for mixed and cold storage facilities. This heightened demand for logistics centers drove greater investment and development, leading to a surge in land prices in favorable locations. To optimize high-cost development projects, investors and developers leaned towards developing mixed or cold storage facilities for relatively higher rents. Consequently, this trend has resulted in an oversupply of cold storage facilities, particularly in the southwest, where the total GFA of new cold storage facilities is approximately 12 times larger than it was five years ago.