Why land restoration is key for Korea’s logistics property sector

Damaged land could help address the lack of developable land in Seoul’s Capital Area.

Just like anywhere else in the world, Korea’s logistics market is heavily benefitting from the unprecedented growth of e-commerce during the pandemic. As a result, there have been a significant increase in construction permits to build logistics facilities with a GFA of 10,000 sqm or more in SCA (Seoul Capital Area) since 2018. 

However, JLL says the significant number of regulations regarding development in SCA is making it more difficult to build logistics facilities. A lack of developable land, coupled with civil complaints, is also expected to make it more challenging to develop new logistics facilities in SCA in the future. 

JLL adds, “Considering the difficulties mentioned above, the damaged land restoration project within the green belt attracts attention as an alternative development area for logistics facilities.”

Here’s more from JLL:

Why damaged land restoration project?

Damaged land is defined as where land use has been changed unlawfully after obtaining a construction permit for animal or plant-related facilities in the green belt. The goal of the damaged land restoration project is to repurpose such illegally used land into legitimate logistics facilities. In order to develop logistics facilities within the damaged area, more than 30% of the damaged land in the green belt must be returned to the community. Several damaged land sites (GFA of 3,000 sqm or more per site) that collectively add up to a GFA of 10,000 sqm or more might be needed to meet the minimum area threshold required for a damaged land restoration project.

The damaged land restoration project could be a new, alternative option for investors and developers that provides new developable land for constructing logistics facilities in SCA.

Examples of damaged land restoration projects

Notably, many damaged land restoration projects were approved in the northern district of SCA, where green belt restricts development. As of December 2020, a total of 126 requests were submitted for construction permits in damaged land restoration projects (91 in Namyangju, 27 in Hanam, 3 in Guri, 2 in Goyang, and 3 in Ansan).

Hanam city plans to complete two to three new logistics facilities and to return about 30% of the project land site to the community. Recently, Namyangju city also completed consultations with the government on initiating a damaged land restoration project.

Challenges and limitations of damaged land restoration projects

The bill of damaged land restoration projects was eased in 2019 to allow for more land redevelopment. Nevertheless, there are still 35 evaluation criteria that have to be met to initiate a damaged land restoration project, which could be quite off-putting as developers need to get approvals from many stakeholders.

Due to the scarcity of developable land, investors and developers are also looking into areas to the south-east of SCA, such as Chungcheong-do. Damaged land restoration projects would not only provide an alternative option to developers but also contribute to the community by rehabilitating damaged land.