Korea Logistics 2H/2024

SUPPLY

With the onset of COVID-19, online retail sales surged unexpectedly, driving a significant increase in the construction of logistics centers starting in early 2020. Based on logistics centers with a GFA exceeding 16,500 sq m in the Seoul Metropolitan Area (SMA), annual new supply averaged approximately 1 million sq m between 2015 and 2017 and 2 million sq m from 2018 to 2021. However, new supply rose sharply to 4 million sq m in 2022 and further to 6 million sq m in 2023.

By the end of 2023, the total GFA of logistics centers exceeding 16,500 sq m in the SMA reached 26.9 million sq m, roughly four times the stock recorded at the end of 2015. However, rising benchmark interest rates, escalating construction and labor costs, and tightening conditions in the financing market have led to extended construction timelines and delays in project commencements.

As a result, the new supply significantly declined to 2.8 million sq m by Q3/2024. Including projects expected to be completed within the year, the total new supply for 2024 is projected to reach approximately 3.8 million sq m, just 63% of the 2023 level.

In addition to the significant decline in new supply in 2024 after a peak in 2023, persistent construction delays and high construction costs suggest that new supply is likely to follow a downward trajectory in the coming years. While most projects permitted between 2019 and 2021 progressed to construction, the proportion of pending or delayed projects has steadily increased since 2021.