Recently, due to the construction market downturn and rising construction costs, construction companies are avoiding bidding wars for redevelopment projects and reinforcing selective bidding practices, while steady bidding wars are occurring among mid-sized construction companies at street housing redevelopment sites.
According to the redevelopment industry on the 24th, the street housing redevelopment association in the area of 145-66 Cheonho-dong, Gangdong-gu will hold a general meeting on the 28th to select a construction company. Dongbu Corporation and Hanshin Engineering & Construction are competing.
The street housing association in the area of 225-16 Cheonho-dong will also hold a general meeting on the same day to select a construction company between Ssangyong Engineering & Construction and HJ Shipbuilding & Construction. The street housing in the area of 340-20 Wonjong-dong, Bucheon will select a construction company between IGA General Construction and Rishou General Construction.
Earlier, the street housing redevelopment association in the area of 922 Siheung-dong, Geumcheon-gu also completed bids for construction companies on the 9th, resulting in bidding competition between Ssangyong Engineering & Construction and Dongbu Corporation.
In April, during the selection of construction companies for the street housing redevelopment project in the 4th, 5th, and 6th zones of Gocheok-dong, Guro-gu, Dongbu Corporation was chosen by the residents after competing with Ssangyong Engineering & Construction.
The street housing redevelopment project is an initiative implemented in February 2018 to revitalize small-scale housing redevelopments. It involves demolishing aging low-rise dwellings adjacent to roads and constructing small-scale apartments in their place. There are benefits such as eased standards for landscaping, building height restrictions, and parking installations.
The biggest advantage is that the procedures for designating redevelopment areas and forming project committees are omitted, allowing for simultaneous processing of business implementation approval and management disposition approval through construction review, which facilitates the speed of the project, and the small number of members leads to relatively quicker consensus-building. While reconstruction typically takes over 10 years, the street housing redevelopment project can be completed within 3 to 4 years.
The street housing redevelopment project is smaller in scale, leading to infrequent participation from large construction companies, and project members rarely prefer the brands of large construction firms due to the burden of contributions. Given the recent market downturn and the poor cash flow of mid-sized and small construction companies, the street housing project is considered suitable as it requires lower promotional expenses and has a faster project pace.
A representative of a mid-sized construction company noted, "It is less burdensome than regular redevelopment projects that have to compete with large construction companies, and because orders are issued by dividing areas, winning one contract increases the likelihood of adjacent street housing projects being secured, so we are actively participating." He added, "The project pace is fast, and in the case of Seoul, the project's profitability is not bad, making it a good opportunity for mid-sized construction companies."
Another construction company representative stated, "The projects are not large, and many are being promoted by public bodies, reducing expense burdens." He added, "In typical redevelopment and restoration projects, if you lose the bidding war, promotional expenses become sunk costs, which significantly impacts us. The street housing redevelopment project has lower expense burdens and thus carries relatively lower risks."
The reduced risk of unsold units is also highlighted as a strength. A representative of a mid-sized construction company said, "Recently, the sales market has been sluggish, and many business sites are facing delays in permits and construction, with rising construction costs adding to burdens. The street housing redevelopment project has a shorter construction period, reducing these burdens," adding, "Especially with the recent strong preference for large construction brands in Seoul, mid-sized construction brands face unsold unit risks, while in street housing projects, securing specific areas makes it possible to promote the brand while minimizing unsold unit risks."