Seoul Logistics Costs Hit 10 Million Won per Pyeong as Supply Freezes
Seoul logistics development costs exceed 10 million won per pyeong while transaction prices lag, creating a structural supply gap.
Key points
- Seoul A-class logistics development costs reached 10 million won per pyeong, exceeding transaction prices by 20 to 30 percent.
- Foreign investors drove 74.7 percent of 2025 Seoul distribution center transactions, leading market activity during the supply freeze.
- Standard rental contracts now feature 2.0 to 3.0 percent annual CPI-linked increases, improving net operating income stability for assets.
Effective development costs for A-class Seoul logistics centers reached 10 million won per pyeong. This figure exceeds current market transaction prices by 20 to 30 percent, signaling a sharp divergence between construction costs and asset values.
Shinyoung Asset reported that project financing constraints and rising labor costs have halted new supply. The market now faces a structural supply cliff, limiting new development opportunities in the metropolitan region.
Supply constraints drive price divergence
Transaction prices for A-class assets range from 5 to 10 million won per pyeong. This gap creates a valuation floor that prevents further declines in existing asset values.
Distressed assets in hard markets traded at 4.5 to 5.5 million won per pyeong. These levels represent 50 to 60 percent of the total development cost, indicating deep discounts for secondary properties.
Foreign capital dominates acquisition activity
Foreign investors accounted for 74.7 percent of 2025 Seoul distribution center transactions. Global funds like Blackstone and KKR are actively acquiring prime assets and large portfolios.
Domestic short-term funds remain cautious due to high interest rates and leverage burdens. Long-term institutional investors and strategic buyers have filled the resulting gap in the market.
Rental terms improve asset stability
Standard contracts now include annual rent increases of 2.0 to 3.0 percent linked to CPI. This structure reduces free rent periods and stabilizes the net operating income of assets.
The report recommends a core strategy for buying high-quality existing assets. It also suggests value-add strategies for transforming distressed properties in southeastern and southern regions.
Jin Won-chang of Shinyoung Asset noted that buying existing assets is now more advantageous than building new ones. The scarcity of completed high-quality assets will increase as new supply remains blocked.
