With Oh Se-hoon winning a fifth term as Seoul mayor, construction companies pushing large-scale mixed-use developments in the capital are breathing a sigh of relief. Not only has policy continuity been secured for multi-trillion-won projects such as the northern Seoul Station rail area development and the Jamsil sports and MICE mixed-use complex, but the drive to expand mixed-use development centered on station areas and growth hubs also appears more likely to continue.
Mixed-use development is a model that concentrates not only housing but also office, commercial, hotel, and cultural facilities in a single space. It has recently established itself as a core model for developing central Seoul.
According to the construction industry on the 15th, major builders have closely watched the outcome of the Seoul mayoral election. Because City Hall has made high-density mixed-use development in station areas and growth-hub-style mixed-use development core urban policies in recent years, they judged that the business environment could change depending on whether the mayor changed.
During the campaign, Mayor Oh proposed as key pledges the upgraded Rapid Integrated Planning 2.0, expansion of mixed-use development in station areas, and fostering growth hubs in the northern districts. The plan is to expand high-density mixed-use development that combines residential, office, and commercial functions around station areas across Seoul and to invigorate private-sector participation.
A number of large-scale mixed-use development projects are underway in Seoul. Because these projects take a long time for permits and administrative procedures, changes in policy direction have a significant impact on project speed and profitability.
Hanwha's construction division, which is leading the northern Seoul Station rail area development, and HDC Hyundai Development Company, Jungheung Construction, WOOMI Construction Co., and Kumho E&C, which joined the Jamsil MICE project, view the securing of policy continuity positively.
Hyundai Engineering & Construction is also pushing major mixed-use projects in Seoul, including the Bokjeong Station area mixed-use development, development of the CJ site in Gayang-dong, and redevelopment of the Hilton Hotel site. The industry is also watching for new order opportunities stemming from expanded mixed-use development in station areas and downtowns by Lotte Construction, GS Engineering & Construction, POSCO E&C, and Daewoo Engineering & Construction. These builders have consistently shown interest in Seoul's mixed-use market, including by joining rival consortia during the Jamsil MICE project bidding.
An official at a major builder said, "Even if the mayor changed, it would be difficult to halt projects already underway entirely, but confusion could arise as detailed plans are reexamined or project directions are adjusted," adding, "From the perspective of private operators, the biggest concern is a sudden shift in policy direction or a reexamination of existing plans."
What the industry feared more was a potential contraction in the pipeline of new projects compared with existing ones. If the station-area and downtown mixed-use policies pushed by the mayor were scaled back, the volume of future tenders itself could decline.
In March, the Seoul Metropolitan Government expanded all 325 station areas as eligible sites for mixed-use development and released its Station-Area Live-Work-Play Activation Strategy to pursue 100 new development projects over the next five years. It also plans to push growth-hub-style mixed-use development applying a maximum floor area ratio of 1,300% at transfer stations.
Another official at a major builder said, "What the industry feared was not so much the suspension of existing projects as a reduction in the volume of new mixed-use projects to come," adding, "With the continued push for station-area and growth-hub development, we expect much of the policy uncertainty to be resolved."
Mid-sized builders also view the election result positively. If the redevelopment, reconstruction, and large mixed-use markets were to contract, major builders could expand into nonresidential markets such as offices, logistics centers, and remodeling, intensifying competition.
An official at a mid-sized builder said, "If the redevelopment, reconstruction, and large mixed-use markets shrink, major firms are more likely to enter the nonresidential market," adding, "A steady supply of large projects benefits the construction market as a whole."