[BizHanKook] While the number of redevelopment and reconstruction projects in Seoul has increased by nearly 20% over the past year, it has been confirmed that one out of every five new project sites is located in Yangcheon-gu. As the reconstruction of the Mok-dong Sin-sijigaji (New Town) apartments has gained momentum, the number of redevelopment project sites in Yangcheon-gu has more than doubled, from 11 to 23. This is largely due to the addition of nine complexes that had not been designated as redevelopment zones until the first half of last year.
Seoul Redevelopment Projects Up 19% in a Year… Yangcheon Sees ‘Largest’ Increase
An analysis of Seoul Metropolitan Government’s project status data by BizHankook shows that as of the end of June this year, there were 358 redevelopment project sites in Seoul, an increase of 58 (19%) from a year ago. The number of projects added in the last year accounts for 71% of the total 82 projects added over the past three years. The growth rate has become significantly steeper recently. This count excludes urban environmental improvement projects, which focus heavily on downtown and commercial areas.
By district, Yangcheon-gu recorded the largest increase. The number of redevelopment sites in Yangcheon-gu grew from 11 in June last year to 23 this June, an increase of 12 (109%). This represents 21% of the total increase in Seoul, meaning 1 in 5 new Seoul redevelopment projects emerged from Yangcheon-gu. Following this were Gangdong-gu with 8 new sites (from 9 to 17), Eunpyeong-gu with 5 (from 8 to 13), and Yeongdeungpo-gu with 4 (from 26 to 30).
The surge in Yangcheon-gu has been driven primarily by the Mok-dong Sin-sijigaji apartments. As of June last year, there were five reconstruction projects in the Mok-dong Sin-sijigaji complex (Complexes 6, 8, 12, 13, and 14), but by June this year, nine more were added, bringing all complexes from 1 to 14 into the fold. The nine newly joined complexes—1, 2, 3, 4, 5, 7, 9, 10, and 11—were designated as redevelopment zones one after another between July and December of last year. These account for 75% of the total increase in Yangcheon-gu and 16% of the total increase in Seoul over the past year.
In addition to the Mok-dong Sin-sijigaji, three other redevelopment projects have been added in Yangcheon-gu: the areas around 232 Mok 2-dong, 77 Sinwol 5-dong, and the Sinwol Si-yeong reconstruction project. The area around 232 Mok 2-dong is at the promotion committee stage, while the 77 Sinwol 5-dong and Sinwol Si-yeong projects have reached the stage of establishing a union. While non-Mok-dong projects are also increasing, the focus of recent growth is clearly on Mok-dong, as 9 out of the 12 new projects in Yangcheon-gu are part of the Mok-dong Sin-sijigaji.
The scale of the projects is also significant. The Mok-dong Sin-sijigaji complexes 1–14 are expected to be reconstructed from their current 26,629 households to 47,438 households. If completed as planned, there will be a net increase of 20,809 apartments—a volume equivalent to 78% of the current number of households in Mok-dong Sin-sijigaji. As of June this year, the 14 Mok-dong complexes account for 78% of the 60,500 total planned households across all 23 redevelopment projects in Yangcheon-gu.
Yoon Ji-hae, a senior researcher at Real Estate R114, explained, “The increase in redevelopment projects in Seoul can be seen as a result of the city government promoting project activation through measures like the ‘Fast-Track Integrated Planning.’ However, there is a limit to judging the scale solely by the number of sites, as the area of each site varies significantly. Mok-dong, in particular, has low existing floor area ratios and large land shares, and both the union members and the local government are strongly committed to the project, leading to favorable conditions and fast progress.”
Construction Companies Eye 30 Trillion Won Market… Complex 6 is ‘Solely’ Selected
As Mok-dong reconstruction enters the mainstream, interest from the construction industry is mounting. The industry estimates the total construction cost for all 14 complexes at approximately 30 trillion won. DL E&C and GS E&C previously set up promotional spaces in Mok-dong for the Complex 6 project and the former KT site project ‘Mok-dong Yunseul Xi,’ respectively. Recently, Hyundai E&C and Daewoo E&C have opened promotional spaces with an eye on future orders, and Lotte E&C is also planning to open its promotional hall this October.
To date, Complex 6 is the only one among the 14 Mok-dong Sin-sijigaji complexes to have selected a contractor. After two failed bids due to only one company bidding, DL E&C won the 1.2868 trillion won Complex 6 project in June. Having proposed its high-end brand ‘ACRO,’ DL E&C has signaled its intention to use Complex 6 as a bridgehead for securing additional orders. Mok-dong Complex 6 is planned to be transformed into 14 buildings of up to 49 floors, totaling 2,173 households.
Subsequent complexes are also proceeding with contractor selection. Complex 10 designated Hyundai E&C as the preferred bidder last month after it was the sole bidder in two consecutive tenders, and the two are now in the process of finalizing a private contract. Complex 12 has entered a re-bidding process after the first round failed due to a sole bid from GS E&C; the second round is set to close on October 26. Complex 13 is also awaiting a re-bidding announcement after its first round failed due to a sole bid from Samsung C&T.
There has not yet been a case among the Mok-dong Sin-sijigaji projects where a full-fledged bidding war took place after the final bid submission. While several major firms are active in the Mok-dong area, they seem to be avoiding excessive competition in actual bidding. This is interpreted as a result of a selective bidding strategy, where companies weigh profitability and the likelihood of winning against the heavy burden of construction costs, financing expenses, and bid bonds.
The chance of a bidding war remains for Complex 8, which is currently awaiting its first bid deadline. Four companies—Daewoo E&C, IPARK Hyundai Development, DL E&C, and GS E&C—attended the on-site briefing for the contractor selection tender last month. The estimated construction cost for Complex 8 is approximately 1.1119 trillion won, with the bid deadline set for the 22nd. If multiple companies participate in the actual bidding, it would be the first competitive tender in the history of the Mok-dong Sin-sijigaji contractor selection process.
For most other complexes in the Mok-dong Sin-sijigaji, the schedule for contractor selection has not yet been set. Complex 7 received union establishment approval in July and is speeding up subsequent procedures, such as applying for Seoul’s integrated deliberation in August, while Complex 14 and others are also preparing for the selection process. Whether the industry interest in Mok-dong, which led the rise in redevelopment projects, will actually translate into competitive bidding is a key point to watch for the Seoul redevelopment market in the second half of the year.
An official from a major construction company explained, “Mok-dong has a low existing floor area ratio, so there are many units for general sale, and the profitability is good. When construction companies evaluate a redevelopment project, they look at profitability, the potential to become a landmark, and the possibility of securing additional orders; usually, having just one of these is sufficient. The 14 Mok-dong complexes have all three.” Another official added, “Mok-dong is highly attractive due to its profitability, large scale, high residential preference, and excellent educational environment.”