Warehouse deals in greater Seoul area hit record high in Q4

The total deal volume of Seoul metropolitan area-based grade-A logistics centers hit a record high of 7.2 trillion won ($6.1 billion) last year. A grade-A logistics center is regarded as accounting for more than 33,000 square meters of flooring. 

The transaction volume marks a significant increase from 2.7 trillion won in 2019 and 3.4 trillion won in 2020, said global real estate firm Jones Lang LaSalle Inc. in a report on Jan. 19. The deals in the fourth quarter of 2021 achieved a quarterly record high of 2.5 trillion won. The vacancy rate hit a record low of 1.8%. 

One of the significant deals in the last quarter of 2021 was ESR Kendall Square Real Estate Investment Trust Co.’s purchase of six logistics centers for 790 billion won. Five out of the six centers are located in Anseong and Icheon, both cities in the Seoul capital area. The other one is in Gimhae, a southeastern city located 300 kilometers from Seoul.

Other major deals during the quarter include Singaporean sovereign wealth fund GIC’s pre-purchase of a logistics center complex for 585 billion won from Korea’s Aster Development. The Incheon-based center, completed in the last quarter, is leased by a Korean e-commerce company.

Also, Singapore real estate firm Mapletree acquired two logistics centers based in Yeoju, Gyeonggi Province, for 135 billion won from Korea’s YNP Asset Management. A Korean fashion e-commerce firm is renting the center. German asset manager Union Asset Management purchased a logistics center from KB Asset Management Co. for 104.3 billion won. The Anseong, Gyeonggi Province-based asset is leased by a Korean third-party logistics provider (3PL).

JLL Korea said logistics center transactions, including pre-purchases, will remain active as a number of logistics centers will be provided in the real estate market this year.   

VACANCY RATE TO RISE AS SUPPLY SHORTAGE EASES

During the last quarter of 2021, the vacancy rate of Seoul capital area-based grade-A logistics centers reached a record-low 1.8%. The low vacancy was backed by high demand in e-commerce and 3PL companies, said JLL Korea research head Veronica Shim. 

The grade-A logistics centers, which were newly provided over the last quarter in the Seoul capital area, were fully leased out. This raised the area-based grade-A logistics centers’ net absorption area, or physically occupied area minus the physically vacant area, to 395,340 square meters. The net absorption area for the last year was 1.4 million square meters, the second-largest following the 2020 record.   
 
In the last quarter, most of the demand was from tenants that wanted to lease the entire space in the center, the report said. Three out of four grade-A logistics centers, just completed last quarter, were entirely leased out by a 3PL firm and an e-commerce company. Also, an e-commerce tenant signed a leasing contract for a 59,400-square-meter logistics center completed in the first half of 2021.

New logistics centers will be continually provided in the capital area until 2023, raising vacancy rates around the south and west sub-markets. The new logistics centers, with a combined 1.6 million-square-meter floor area, will be established in the south sub-market by the end of 2023. In the west sub-market, logistics centers with a combined 2.8 million square meters of floor area will be newly provided within two years. 

Vacancies in the Seoul capital area could surpass the supply of logistics centers based in the south sub-market, Shim said in the report. The investment value gap between grade-A logistics centers and others will expand as the supply shortage eases, she added.

Write to A-young Yoon at youngmoney@hankyung.com
Jihyun Kim edited this article.