Mid-tier construction firms are expanding their footprint in Seoul's redevelopment market, long dominated by the country's largest builders, by winning contractor mandates one after another. Regional builders facing growth limits from a slumping provincial housing market and shrinking project pipelines are turning to Seoul and the surrounding metropolitan area, where housing demand remains strong.
Mid-tier builders have been joining bidding contests for Seoul redevelopment projects and securing construction rights, industry officials said on the 28th. Rather than the large-scale reconstruction and redevelopment projects where major builders compete, they are focusing on relatively smaller projects such as street-block housing improvement projects and small-scale reconstruction.
Doosan E&C (011160) has won six redevelopment projects in Seoul alone this year, securing work worth a combined 897.2 billion won ($643 million). The projects include the reconstruction of Shinan Villa in Magok-dong and a street-block housing improvement project at 655-78 Sillim-dong, along with public redevelopment of the Hongeun No. 1 and Chungjeongno No. 1 districts, redevelopment of the Cheonwang Station No. 3 area and redevelopment of the Mapo-ro 5-2 district. Outside Seoul, the company is diversifying its portfolio by landing larger projects. On the 20th of this month, it won a 515.4 billion won urban public housing complex project in Wonmi, Bucheon, Gyeonggi Province.
Hoban Construction, which has made redevelopment a new growth engine and strengthened its related organization, also won five projects in Seoul this year. After taking the Myeonmok Station 6-3, 6-4 and 6-5 districts in Jungnang-gu at once, it was selected on the 19th of this month as contractor for the reconstruction of Changdong Sanga Apartment No. 1 in Dobong-gu and a street-block housing improvement project in the Junghwa Station 2-6 district in Jungnang-gu. In the Myeonmok-dong area in particular, the company plans to build a branded residential cluster through linked contracts. Individual sites are smaller than major redevelopment projects, but the strategy is to secure multiple sites and expand brand presence within a single neighborhood.
Kye-Ryong Construction Industrial (013580), headquartered in Daejeon, is also expanding its Seoul redevelopment orders. After winning a street-block housing improvement project around 241-2 Gocheok-dong in Guro-gu in May, it was selected this month as contractor for the Sinyeong No. 1 district housing redevelopment project in Sinyeong-dong, Jongno-gu. The two projects are worth a combined 194.9 billion won.
Jeil Construction, headquartered in Jeonnam-Gwangju Special Metropolitan City, secured construction rights last month for the 2-2 and 2-4 districts of the Moa Town project at 354 Hwagok 1-dong in Gangseo-gu, Seoul, its first Seoul redevelopment work this year. The two projects total about 850 units. Industry watchers say the company built its base for the mandates by taking part in project briefings since last year.
Cases of expansion into prime Seoul areas such as Gangnam-gu are also increasing. HS Hwaseong, headquartered in Daegu, secured construction rights last year for the small-scale reconstruction of Jamwon Hanshin Town in Jamwon-dong, Seocho-gu, and the small-scale reconstruction of Shinsung Yeonlip in Seongsu-dong, Seongdong-gu. At the end of last month, it was selected as contractor for a street-block housing improvement project at Bichui Town in Daechi-dong, Gangnam-gu, widening its business scope. "This goes beyond simply broadening our geographic reach — it is about building a stable foundation for growth," an HS Hwaseong official said.
Mid-tier builders have moved into Seoul and metropolitan-area redevelopment because the prolonged slump in provincial housing markets has increased the need for diversification. According to the Ministry of Land, Infrastructure and Transport, unsold homes nationwide totaled 68,217 units as of July, of which 67,223 units, or 98.54%, were outside Seoul. Reduced supply of public housing land such as new towns, along with fewer opportunities to act as project developer, is also cited as a reason mid-tier builders are turning to redevelopment. "There are limits to growth in provincial housing markets where demand is insufficient, so portfolio diversification is necessary," an official at one mid-tier builder said. "We are responding to changes in the environment and actively seeking new business opportunities beyond our existing public land projects."
