Korean cold storage rents decrease by 7.9% in 2023

Dry storage rents also declined by 1.3%.

In 2023, the logistics vacancy rate in major districts in Korea rose sharply due to significant new supply additions. 

According to a Savills report, the incentives provided to tenants such as rent-free periods surged as well, leading to a 1.3% and 7.9% year-on-year decrease in average monthly effective rents for dry and cold storage, respectively, to KRW27,800/py and KRW54,500/py. 

Here’s more from Savills:

The monthly effective rent of dry storage in the Southeast District was KRW25,800/py, down by 0.3% from the previous year. Despite the district experiencing the largest supply, the decline in rent is expected to be minimal due to high demand driven by its advantageous location. Conversely, the effective rent of cold storage decreased by 4.1% from the previous year to KRW54,900/py. Among the centers completed within the last two years, rent-free periods increased by up to 5 months per year due to prolonged vacancies in cold storage facilities. 

In the Southwest District, the monthly effective rent of dry storage was KRW34,400/ py, marking a notable decline of 6.9% from the previous year. Similarly, the monthly effective rent of cold storage amounted to KRW60,700/ py, a drop of 11.2% from the previous year. With large-scale logistic centers predominantly supplied in this district, the vacancy rate for cold storage exceeded 40%, leading to a decrease in effective rent by more than 10% compared to the previous year. 

For the South Central District, the monthly effectve rent of dry storage was KRW25,400/py, down 1.5% from the previous year, while cold storage was down 7.1% to KRW49,700/py. South Central District is characterized by steady demand from various factory complexes, including batteries and semiconductors. However, as total stock expanded by more than 37% in 2023, lease marketing to attract new tenants became more competitive, with rent-free periods averaging 1.5 to 2.5 months per year. 

Effective rents in the SMA are experiencing a widespread decline, notably among logistics centers completed during the recent one to two years, with dry storage rents down by 6% YoY, and cold down 16% YoY on average. The variance in logistics and distribution operations, including logistics costs, workforce availability and target customer profiles, differ significantly across locations. Furthermore, the substantial costs associated with relocation have deterred businesses from shifting to newly constructed logistics facilities. 

Consequently, heightened competition is anticipated among the vacant centers to secure tenants.