[비즈한국] An investigation by BizHankook has confirmed that the total volume of maintenance projects secured by South Korea's top 10 construction firms in terms of construction capability nearly tripled in the first half of this year compared to the same period last year. The number of top 10 construction firms with cumulative H1 orders exceeding 1 trillion won increased by five, from two last year to seven this year. Industry experts suggest that construction companies have shifted their focus to maintenance projects, which are considered safer bets during an economic downturn.
‘Samsung C&T028260 No. 1’ H1 Orders for Top 10 Construction Firms Increase 2.8 Times
According to the construction industry, the total volume of maintenance projects won by Korea's top 10 construction firms this year reached 27.8116 trillion won, an increase of 17.7282 trillion won (176%) compared to the same period last year. The number of project sites (based on overlapping calculations for joint ventures) grew by 19, rising from 23 in the first half of last year to 42 in the first half of this year. The average project size per contract for these firms was 662.2 billion won, an increase of 223.8 billion won (51%) from the previous year, indicating that they secured a higher number of relatively large-scale projects. Seven construction firms recorded over 1 trillion won in maintenance orders in the first half of this year, an increase of five compared to the first half of last year.
Samsung C&T recorded the highest order volume in the first half of this year. Its cumulative order value reached 5.7195 trillion won, a 4.9763 trillion won (670%) increase from the 743.2 billion won recorded in the first half of last year. After winning the bid for the Hannam District 4 redevelopment project in Yongsan-gu, Seoul—a project worth 1.5695 trillion won—by defeating Hyundai E&C000720 in January, Samsung C&T went on to secure a total of 8 maintenance projects, including the 698.2 billion won Ulsan Nam-gu B-04 redevelopment project on the 28th. All of its maintenance project wins this year were secured independently, without forming consortia with other construction firms.
Other H1 performance records for the top 10 construction firms are as follows: △Hyundai E&C 5.5357 trillion won (+67% YoY), △POSCO E&C 5.0303 trillion won (+42%), △Lotte E&C 2.9521 trillion won (+215%), △DL E&C375500 2.683 trillion won (0 won during the same period last year), △HDC Hyundai Development Company 2.525 trillion won (+881%), △GS E&C 2.1949 trillion won (+467%), △Daewoo E&C 867.3 billion won (0 won during the same period last year), and △SK Ecoplant 303.9 billion won (-66%). Hyundai Engineering, ranked 4th in construction capability, did not record any maintenance project orders in the first half.
Strategic Alliances and Fierce Bidding Based on Project Scale and Profitability
In the first half of this year, top 10 construction firms engaged in competitive bidding for four maintenance project sites, an increase of three compared to the first half of last year. This year, bidding competitions took place for the Hannam District 4 redevelopment (won by Samsung C&T in January), the Eunhaeng Jugong Apartment reconstruction in Seongnam, Gyeonggi (1.2972 trillion won, won by POSCO E&C in February), the Gangnam Wonhyoseong Villa reconstruction in Seocho-gu, Seoul (338.7 billion won, won by Daewoo E&C on the 14th), and the Maintenance Depot Front District 1 redevelopment in Yongsan-gu, Seoul (924.4 billion won, won by HDC Hyundai Development Company on the 22nd). These were sites considered to have relatively large scales and strong profitability. The remaining 38 projects were awarded through private contracts as competitive bidding did not materialize.
Approximately 28% of the maintenance projects won by the top 10 construction firms in the first half of this year were in the form of consortia. Of the total order volume, 7.752 trillion won was secured jointly with other construction firms. Consortium-led projects included seven major sites worth over 500 billion won, such as the Sutaek-dong redevelopment in Guri, Gyeonggi (2.8069 trillion won, Hyundai & POSCO), the Yeonsan District 5 reconstruction in Yeonje-gu, Busan (1.4674 trillion won, Hyundai & Lotte), the Jangwi District 9 redevelopment in Seongbuk-gu, Seoul (875.5 billion won, DL & Hyundai), the Sanggye District 5 redevelopment in Nowon-gu, Seoul (705.9 billion won, Lotte & GS), the Guun District 1 reconstruction in Suwon, Gyeonggi (664.7 billion won, Lotte & Hyundai), the Mia 9-2 District reconstruction in Gangbuk-gu, Seoul (635.8 billion won, Hyundai & HDC), and the Myeonmok District 7 redevelopment in Jungnang-gu, Seoul (595.9 billion won, SK & Hyundai).
An official from a major construction firm stated, "Maintenance projects are perceived as having lower risks compared to general development projects because the association members, who are existing apartment owners, have already secured the land. There were many sites that faced conflicts due to construction cost increases following inflation, but as a benchmark for construction costs has been somewhat established, firms have turned their attention back to stable maintenance projects." Another official added, "The fact that many highly profitable complexes sought out contractors this year also contributed to the rise. Urban maintenance projects are more about management after winning the bid than the bid itself. We must also watch whether the firms that increased their order volumes can proceed with construction and complete them on time without disputes."