A “warning light” was lit in the logistics center development project, called “the goose that lays golden eggs” and “logistics lottery”, and caused an investment craze. New construction projects have been halted one after another and the number of businesses facing bankruptcy due to non-payment of loans is rapidly increasing. This is the result of a combination of high interest rates and excessive investment. There is growing concern that the spark of corporate insolvency will spread not only to banks and securities, but also to the entire financial sector, including savings banks and capital, as the total amount of loans from project financing alone collateralised (PF) of the logistics center was worth several trillion won.
According to JLL Korea, a global real estate services company on the 20th, it was confirmed that 15 commercial sites (27.2%) of 55 new logistics centers with a total area of 33,000 square meters (10,000 pyeong) or more were expected to be completed by this year they were delayed, as were construction delays. The total area of the 15 commercial sites alone amounts to 1,421,487 square meters (430,000 pyeong). Considering they borrowed 3.5 to 4.5 million won per 3.3 square meters for PF real estate, at least 1.9 trillion won or more are in danger of being converted into bad debt. The industry understands that even in distribution centers under 33,000 square meters, there are about 20 locations where construction has been halted and loans amount to several trillion won. The development of the logistics center was highlighted as a “100-fold project” because it could also be started with a 10% down payment on the land.
There are two reasons why the logistics center development project, which sucked investment like a black hole, quickly failed. First, construction costs increased by 40% compared to last year due to rising raw material prices. Additional loans are needed to complete the project, but the financial companies have closed their wallets in a brawl. A securities industry official said: “The profitability of the business has dropped dramatically due to rising interest rates, making it difficult to obtain additional loans.
Construction sites that have been carefully completed are also struggling to find tenants. Logistics centers usually fill 80% of tenants after completion, so they sell the whole to recoup the investment. However, as the supply of fulfillment centers increased in a short period of time, the demand was unable to keep up. Coupang and Market Kurly, the “big guys” who seemed to buy as soon as they built it, were also hit by the recent expansion restrictions. “I can no longer afford to pay 500 million won in interest a month,” said a representative of a development company.
By Jang Kang-ho / Kim Woo-seop, staff reporter [email protected]
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