High-end (ultra-luxury) brands that builders promote as an apartment upscale strategy are becoming a spark for conflict at urban renewal business sites. Associations demand the application of top-tier brands in hopes of raising home prices and improving project viability, but builders often balk, citing brand scarcity and profitability. As differences remain unresolved, major redevelopment business sites in the greater Seoul area are seeing contract terminations, lawsuits, and even failed selections of a contractor.
According to the urban renewal industry on the 23rd, DL E&C filed for an injunction with the court to suspend the effect of terminating the construction contract and the general meeting to select a new contractor against the association for the "Sangdaewon District 2 Redevelopment" in Seongnam, Gyeonggi. When the association voted to terminate its contract with DL E&C and passed an agenda item to select GS Engineering & Construction as the new contractor, the company moved to block it. DL E&C also filed a main lawsuit separately from the injunction.
Sangdaewon District 2 is a large-scale redevelopment project to build 4,885 households around 3910 Sangdaewon-dong, Jungwon-gu, Seongnam. The total project cost is said to be about 1 trillion won. DL E&C was selected as the contractor in 2015 and signed a construction contract with the association in 2021. The brand specified in the contract at the time was "e-Pyeonhansesang." However, conflict grew as the association later demanded application of "ACRO," DL E&C's high-end brand. When no agreement was reached, the association held a provisional general meeting on May 30 and voted to terminate the construction contract with DL E&C and to select GS Engineering & Construction as the new contractor. Depending on the court's decision, the direction of the construction rights could change.
In Seoul, there was also a case where a high-end brand requirement led to a failed contractor selection. The association for the Macheon District 5 redevelopment in Songpa-gu, Seoul, specified in its April contractor selection notice a "condition for the participation of the contractor's top-tier brand." Macheon District 5 is a project to build 2,041 households on 106,514.4 square meters around 45 Macheon-dong, Songpa-gu. The association's estimated construction cost is 1.0697 trillion won, or 9.02 million won per 3.3 square meters. However, no builders participated in the main bid that closed on the 15th. Observers say it is unusual that there were no bidders for a large redevelopment project exceeding 1 trillion won.
Conflicts over high-end brands have recurred in the past. The Heukseok District 9 redevelopment in Dongjak-gu, Seoul, selected Lotte Engineering & Construction as the contractor in 2018, but terminated the construction contract in 2020 after conflicts over applying a high-end brand. It then signed a new contract with Hyundai Engineering & Construction in 2021 and decided to apply the high-end brand "THE H." The Sindang District 8 project in Jung-gu, Seoul, also signed a construction contract with DL E&C in 2020 but had its contract terminated in 2021 after conflict over applying "ACRO." It is now pushing the project forward with POSCO E&C under the name "HAUTERRE Urbanthus 321."
The urban renewal industry expects the preference for high-end brands will not subside easily. That is because there is strong expectation that, even with higher construction costs, brand premiums can raise pre-sale prices and future home values. Song Seung-hyeon, head of Urban and Economy, said, "Among redevelopment association members, not a few are owners with investment purposes," adding, "They tend to prefer applying high-end brands even if construction costs rise somewhat."
From a builder's perspective, it is difficult to apply high-end brands to all business sites. If brand scarcity weakens, the value as a luxury brand can be damaged. Lee Eun-hyung, a research fellow at the Construction Policy Research Institute of Korea, said, "After 2010, builders developed luxury brands to differentiate from existing apartments, but now many urban renewal associations are demanding them," adding, "If you apply high-end brands everywhere they are requested, brand value will inevitably fall."