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Logistics

Korean logistics centers see high demand from untact businesses amid global pandemic

Jul 22, 2020 (Gmt+09:00)

Logistics center operations in Korea have remained strong amid the global pandemic on account of e-commerce and third-party logistics' (3PL) leasing activities, according to a quarterly report issued by Jones Lang LaSalle Incorporate.

Centers in the Seoul Capital Area have posted an overall vacancy rate of 7.9% during the second quarter, down 2.4% from the previous quarter. This can be attributed to the increased leasing demands from e-commerce and 3PL companies that are seeing a surge in operations from 'untact' consumption.

Untact is a term coined by combining 'un' with 'contact', commonly used in Korea when referring to a non-contact or non-face to face operation such as online businesses.

E-commerce businesses are flourishing as consumers prefer shopping online to avoid physical interaction with others. The early-morning delivery market has seen a boost, creating a greater need for e-commerce businesses to secure storage space for fresh products and seasonal items such as meat, vegetables, fruits, and ice cream.

This could nudge logistics developers to provide more dry-cold complex logistics centers to fulfill the needs of e-commerce tenants who want to store both dry and cold products.

Namsa Logistics Terminal, the largest pure cold logistics center in Korea boasting a 251,239.67 square meter area, successfully rented out all five floors except the second basement.

The average net rent for Grade A logistics center during the second quarter was approximately 31,700 won per pyeong (Korean unit for floorspace, equivalent to 3.3 square meters), a 0.1% quarter-on-quarter increase. The modest increase in net rent is due to the fact that many new logistics centers have been constructed which helped to balance out the soaring leasing demands and keep the price within reasonable range.

The logistics transaction volume posted approximately 184.7 billion won ($155 million) during the second quarter of this year, a significant drop from the previous quarter's volume of 700 billion won due to global uncertainty. The transaction volume is expected to rise during the second half of the year given that the demand for logistic centers remain solid, according to JLL.

Korea’s logistics assets remain attractive to investors. Earlier in April,  a local alternative asset management firm Mastern Investment Management purchased the LG Electronics Logistics Center located in Changwon, Gyeongsangnam-do for 95.5 billion won. The firm also purchased GS Networks Logistics Center in Icheon, Gyeonggi-do to expands its logistics portfolio in Korea.

YNP Asset Management, a real estate investment firm, acquired DPL Logistics Center in Yeoju, Gyeonggi-do for 50.9 billion won this quarter in addition to its purchase of Smart Logistics Center during the first quarter.

Also, ongoing deals such as LB Asset Management’s sale of Icheon Dancheon-ri Logistics Center, and Hana Alternative Asset Management’s sale of Cheonan LG Hausys Logistics Center are likely to be completed during the second half of the year.

 

Write to Chang Jae Yoo at yoocool@hankyung.com

Danbee Lee edited this article

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