A credit squeeze in project financing, along with rising raw material and labor costs, has driven up the cost of developing new logistics centers in the Seoul metropolitan area, leaving the market facing a structural "supply cliff," according to a new analysis. Prices for existing assets, meanwhile, remain 20% to 30% below the cost of new development, making acquisitions far more attractive than building from scratch.
Shinyoung Asset, a real estate services company, said on the 22nd that it had published a report on trends and outlook for the logistics center market in the Seoul metropolitan area.
The effective development cost for a Class A ambient-temperature logistics center in the region has climbed to between 8 million and 10 million won per 3.3 square meters, or pyeong, the report said. Completed facilities, by contrast, are changing hands at 5 million to 10 million won per 3.3 square meters, 20% to 30% below the cost of new development. Floor prices for distressed assets in court and public auctions have fallen to 4.5 million to 5.5 million won per pyeong, or 50% to 60% of development cost.
Shinyoung Asset said that gap is acting as a floor that prevents further declines in asset values. Even amid interest rate volatility, transaction prices for Class A assets have held steady, and capitalization rates — the ratio of annual net operating income to purchase price — have settled at 5.0% to 5.5%. In the leasing market, the halt in new supply combined with a preference for well-located assets has reduced rent-free periods, while annual fixed rent increases of 2.0% to 3.0% and consumer price index escalation clauses have become standard contract terms, improving the stability of cash flows.
The mix of investors is also shifting rapidly. With upward pressure on interest rates and the burden of leverage keeping short-term, dividend-focused capital on the sidelines, domestic institutions and strategic investors with long-term management capabilities have stepped forward, along with global mega-funds including Blackstone, KKR and Starwood Capital. These buyers are using the adjusted price levels to pursue prime assets in the region and large portfolio deals. Foreign capital accounted for 74.7% of logistics center transactions in the Seoul metropolitan area as of 2025.
The report proposed a two-track approach: a core strategy of buying assets with creditworthy tenants and long-term leases at prices below development cost, and a value-add strategy of acquiring distressed assets cheaply through court and public auctions and raising their value. By district, it recommended selective acquisition of prime assets with last-mile locations in the western and northwestern areas, and value-enhancement plays in the southeastern and southern areas that exploit the gap between actual transaction prices and auction prices.
"Right now, for logistics centers in the Seoul metropolitan area, buying existing assets is more advantageous than building new ones," said Jin Won-chang, a director in Shinyoung Asset's investment advisory division. "With new supply blocked, the scarcity of high-quality completed assets will only grow."
