Hoban Construction will establish a new office to strengthen urban redevelopment projects in Seoul. Hoban Construction, which had grown through its own projects that purchased land in the provinces and handled both construction and development, has formally thrown down the gauntlet to the Seoul market.
With the real estate market sluggish except in parts of the greater Seoul area such as Seoul itself, and with the government deciding not to sell public housing sites to the private sector, the company appears to be focusing on urban redevelopment rather than its own projects, which have become more uncertain.
According to the construction industry on the 17th, Hoban Construction has recently been confirmed to be pushing to establish a Seoul office to significantly strengthen its urban redevelopment projects in Seoul. Until now, urban redevelopment projects in the greater Seoul area, including Seoul, had been carried out mainly through the South Gyeonggi office, but going forward, an office dedicated solely to Seoul will be created. The Seoul office is scheduled to go into full operation next month.
An industry official said, "Hoban Construction has recently strengthened its organization to expand urban redevelopment in Seoul rather than its own projects." A Hoban Construction official said, "In the institutional sector of dwellings, we will promote urban redevelopment projects such as street housing and Moa Town centered on Seoul and the greater Seoul area," adding, "We are working to enhance our bidding capacity by establishing and expanding offices to continue diversifying our business structure and expanding our portfolio."
Hoban Construction plans to fully jump into Seoul's urban redevelopment through the opening of this office. Despite the real estate downturn, some parts of the greater Seoul area, including Seoul, face strong demand for redevelopment and reconstruction due to a shortage of dwellings supply. Large construction companies are also increasingly turning to redevelopment rather than their own projects, which carry greater uncertainty. The government and local governments are rapidly easing regulations on redevelopment to supply more dwellings in urban areas, raising expectations that projects will proceed faster and profitability will improve.
Ahead of the opening of the Seoul office, Hoban Construction had already won some contracts, laying the groundwork for entering the Seoul redevelopment market. In Jun., it won the Jayang 1-4 district street housing redevelopment project in Gwangjin District, Seoul, worth a total of 90.8 billion won. The project calls for four buildings with 275 units, ranging from three floors underground to 23 floors above ground.
4th, it was selected as the builder for the street housing redevelopment project at 144-20, Sinwol-dong, Yangcheon District, Seoul. Through this project, Hoban Construction will build five buildings from three floors underground to 13 floors above ground, with 368 apartment units and ancillary welfare facilities.
Until now, Hoban Construction had placed great weight on its own projects within its overall business. However, as the real estate market slumped and new order activity decreased, the share of its own projects gradually declined. The backlog of orders for its own projects, which was 254.3 billion won in 2021, fell by more than half to 108.21 billion won last year. In particular, as the risk of unsold units has grown in the provinces, uncertainty surrounding its own projects is also increasing.
The model of receiving allocations in public housing sites and carrying out its own projects has also become difficult. Hoban Construction in the past mobilized multiple affiliates to win bids for government public housing sites through "swarm bidding," earning more than 1 trillion won in sales revenue, but the government has blocked the structure that enabled swarm bidding. Moreover, recently, with the policy that public housing sites will not be sold to private builders and will instead be developed directly by the Korea Land & Housing Corporation (LH), it has become impossible to pursue own projects using public housing sites.
When entering Seoul's urban redevelopment market, Hoban Construction is expected to focus on small-scale sites rather than large business sites. There is also speculation that it will enter larger sites in the form of consortia. An industry official said, "In large business sites, there is strong preference for certain major players such as Samsung C&T and Hyundai E&C, so it will not be easy to find opportunities to enter," adding, "In Hoban's case, it is expected to enter the market by targeting small-scale business sites and then pursue a strategy of winning medium- to large-scale projects thereafter."