[비즈한국] Amid worsening profitability in the construction industry due to rising raw material costs and labor expenses, the urban renewal project orders (including remodeling) for the top 10 construction firms by capability have risen by approximately 39% compared to the previous year. It appears that these firms have increased their order volume by selectively targeting profitable project sites, avoiding unnecessary cutthroat competition, and sharing risks.
All firms except DL E&C see growth in orders, Hyundai E&C000720 takes top spot for 6th consecutive year
According to an analysis by Bizhankook based on data from each company, the top 10 construction firms secured a total of 27.8701 trillion KRW in urban renewal projects this year, an increase of 7.8295 trillion KRW (39%) compared to last year. Excluding DL E&C (-49%), companies including HDC Hyundai Development Company294870 (643%), Lotte E&C (278%), GS E&C006360 (96%), Daewoo E&C047040 (77%), Samsung C&T (74%), Hyundai E&C (31%), Hyundai Engineering (24%), SK Ecoplant (13%), and POSCO E&C (3%) all saw their order figures rise.
Hyundai E&C has maintained its position as the top contractor for urban renewal projects for six consecutive years. Starting with the Jung-2 District urban environment renewal project in Seongnam, Gyeonggi-do (678.2 billion KRW) in March, the company has secured a total of 9 projects, including the reconstruction of the Sinbanpo 2nd Apartment in Seocho-gu, Seoul (1.283 trillion KRW) on the 1st of this month. Its cumulative order amount reached 6.0613 trillion KRW, surpassing the second-place POSCO E&C by 1.3422 trillion KRW. At the end of last year, Hyundai E&C had narrowly overtaken POSCO E&C (4.5988 trillion KRW) with a cumulative order total of 4.6122 trillion KRW.
The cumulative order amounts for other construction companies are as follows: POSCO E&C 4.7191 trillion KRW (10 sites), Samsung C&T 3.6398 trillion KRW (7 sites), GS E&C 3.1097 trillion KRW (6 sites), Daewoo E&C 2.9823 trillion KRW (7 sites), Lotte E&C 1.9571 trillion KRW (5 sites), Hyundai Engineering 1.5794 trillion KRW (5 sites), HDC Hyundai Development Company 1.3332 trillion KRW (4 sites), SK Ecoplant 1.3073 trillion KRW (7 sites), and DL E&C 1.1809 trillion KRW (3 sites).
Avoiding competition through 'private contracts and consortiums,' sharing risks
This year, the urban renewal projects of the top 10 construction firms were concentrated in the Seoul metropolitan area. Out of 63 project sites in total, 50 (79%) were located in the capital region. The number of project sites (and order amounts) by region are: Seoul 41 sites (17.0569 trillion KRW), Busan 7 sites (4.1975 trillion KRW), Gyeonggi 7 sites (3.6406 trillion KRW), Daejeon 5 sites (1.8301 trillion KRW), Incheon 2 sites (734.3 billion KRW), and Jeonbuk 1 site (410.5 billion KRW). Notably, projects in the "Gangnam 4 districts"—Gangnam-gu, Seocho-gu, Songpa-gu, and Gangdong-gu—accounted for 18 sites (7.8592 trillion KRW), or 29% of the total.
97% of the secured urban renewal projects were in the form of private contracts. Of the 63 sites that selected top 10 construction firms as contractors this year, 61 chose them through private contracts. The only projects where competitive bidding actually occurred were the Hanyang Apartment reconstruction in Yeongdeungpo-gu, Seoul (774 billion KRW) won by Hyundai E&C in March, and the Dogok Gaepo Hanshin Apartment reconstruction in Gangnam-gu, Seoul (438.5 billion KRW) won by DL E&C in August. While urban renewal contractor selection is based on competition, contracts can be switched to private agreements if bidding is repeatedly aborted.
Consortiums were used to reduce risks. This year, there were 14 projects (22%) that were jointly won by the top 10 firms in partnership with other companies. These were mostly redevelopment projects, which are larger in scale than those won by a single company. The average size of the 49 projects won by individual firms was 453.1 billion KRW, while the average size of the 14 consortium-led projects reached 761.6 billion KRW. Essentially, large construction firms shared the risk burden for these massive redevelopment projects.
Some of the projects jointly won by the top 10 firms this year include the Geoyeo Saemaeul District in Songpa-gu, Seoul (Samsung-GS, 725 billion KRW), Singil District 2 in Yeongdeungpo-gu, Seoul (Samsung-GS, 1.1072 trillion KRW), Bugae District 5 in Bupyeong-gu, Incheon (Hyundai-SK, 734.2 billion KRW), Goejeong District 5 in Saha-gu, Busan (Hyundai-Daewoo, 1.3086 trillion KRW), Banghwa District 3 in Gangseo-gu, Seoul (Hyundai-Hyundai Engineering, 692 billion KRW), Gajaewul District 7 in Seodaemun-gu, Seoul (Hyundai-Hanwha, 613.8 billion KRW), Gayang-dong District 1 in Dong-gu, Daejeon (SK-HDC, 514.5 billion KRW), and the Doma Byeondong District 6-1 redevelopment in Seo-gu, Daejeon (SK-Hoban, 397.7 billion KRW).
Regarding this, an official from a large construction firm assessed, "As overall profitability in the construction industry has worsened due to the economic downturn, large companies have primarily focused on selectively winning urban renewal projects in the metropolitan area where housing demand and project profitability are guaranteed. It was a year where companies sought 'ways to win without fighting' by reducing risks rather than increasing unnecessary costs through bidding wars."