Samsung C&T, GS Engineering and Construction, and Hyundai Engineering and other large construction companies are entering the 'public redevelopment' business. In the past, public-led projects were primarily participated in by small- to medium-sized construction firms due to low revenue. However, as public construction costs have risen and the speed of various approvals has increased along with easier funding acquisition, large construction companies are now joining in.
On the 10th, according to the Korea Land and Housing Corporation (LH) and the construction industry, GS Engineering and Construction secured the public redevelopment project for the Jungwa 5 district in Seoul on the 18th of last month. The project involves constructing 14 apartment buildings with a total of 1,610 units, spanning from underground four floors to 35 above ground, in the area around 122 Jungwa-dong, Jungnang-gu, Seoul. The project cost is 649.8 billion won.
In the past, public projects led by the Korea Land and Housing Corporation (LH), Seoul Housing and Communities Corporation (SH), and others have primarily involved small- to medium-sized construction firms. This is due to low unit prices and low profitability. Public redevelopment began to be promoted in 2020 as part of the 'housing supply expansion plan for the capital region.' The core aspect is to normalize stalled maintenance projects with the public's support, such as raising the floor area ratio and simplifying the procedures like integrated review for permits and fund assistance.
The contractor for public redevelopment is selected through a process in which the residents' representative meeting recruits participants through competitive bidding according to the Urban and Residential Environment Maintenance Act and recommends the contractor to LH after a vote by landowners. Afterward, LH and the contractor will sign a joint business implementation agreement and proceed with the project.
Hyundai Engineering also secured the public redevelopment maintenance project for the Jeonnong 9 district last month. The project involves 9 apartment buildings totaling 1,159 units and community facilities, spanning from underground four floors to 35 above ground, in the area around 103-236 Jeonnong-dong, Dongdaemun-gu, Seoul. The total project cost is 440 billion won.
The leading construction company, Samsung C&T, is also actively participating in public redevelopment. Last August, it decided to undertake construction in the 'Geoyeosaemaul' district in collaboration with GS Engineering and Construction. This district is the first to choose the public redevelopment method in the Gangnam District (Gangnam, Seocho, Songpa). The Geoyeosaemaul project involves constructing 12 buildings, 1,678 units, up to 35 floors above ground near the Geoye Station on Line 5, with a total project cost of 700 billion won.
Samsung C&T was also selected as the contractor for the public redevelopment of the Yangpyeong 13 district in Yeongdeungpo-gu and the Heukseok 2 district in Dongjak-gu in July and October 2022. A Samsung C&T official noted, "The public redevelopment process is relatively fast in terms of permitting," adding, "There are also advantages in project viability, which is why we decided to participate."
Large construction companies are engaging in both private and public redevelopment because profitability has increased compared to the past. The projected construction costs for public redevelopment projects in Seoul rose from about 5 million won per 3.3 square meters in 2023 to approximately 8 million won last year. LH stated that the average construction cost for public redevelopment is between 7 million and 7.8 million won per 3.3 square meters.
An LH official stated, "To activate public redevelopment, we standardized criteria such as construction costs to allow private participation," and added, "We will hold forums to gather opinions and reflect key contents of the Ministry of Land's standard construction contracts for maintenance projects to minimize contractor risks as much as possible."