Remodeling Contract Great Battle Begins

Regulatory Backlash Effects on Reconstruction
Acceleration of Major Projects within Seoul

[Asia Economy Reporter Choi Dong-hyun] Due to the spillover effect of reconstruction and redevelopment regulations, major remodeling projects in Seoul are gaining momentum. In particular, large construction companies facing urgent needs to secure work orders are actively competing to obtain remodeling construction rights, intensifying competition among firms.

According to industry sources on the 15th, the Mokdong Woosung 2nd Remodeling Association in Sinjeong-dong, Yangcheon-gu, Seoul recently held a site briefing session to select a construction company. Lotte Construction and HDC Hyundai Development participated in the briefing and submitted bid deposits. Although GS Construction, which had initially shown interest in the project, withdrew, competitive bidding is unusual considering that remodeling project bids have mostly been conducted through negotiated contracts. Since the bid deadline is October 27, more than a month away, industry observers expect more companies to join the bidding. Mokdong Woosung 2nd is a mid-rise complex with 1,140 households and 18 floors. The association plans to remodel the complex using vertical extension methods to build a new apartment complex with 1,311 households spanning from four basement floors to 21 above-ground floors.

Earlier, in Dongbu Ichon-dong, Yongsan-gu, the Ichon Hyundai Apartment complex with 653 households selected Lotte Construction as the preferred negotiation partner. After two failed attempts to select a construction company, the association changed the bidding method to a negotiated contract and plans to finalize the contractor through a general meeting. Lotte Construction proposed applying its premium brand 'LE-EL' to this remodeling project and presented various specialized design plans, including a sky lounge, sky park, fitness center, and swimming pool. In December last year, Lotte also secured the remodeling construction rights for Lotte Castle Galaxy Phase 1 in Jamwon-dong, Seocho-gu. The Ichon Hyundai complex will increase to 750 households through remodeling.

Large construction companies are also actively participating in remodeling small to medium-sized complexes in the Mapo-gu area. GS Construction participated in a recent site briefing for the Bamseom Hyundai remodeling in Hyeonseok-dong. Despite being a small complex with only 219 households built in 1999, the interest from a major brand construction company is notable. The complex is pursuing remodeling through horizontal extension to widen the existing area. Besides Bamseom Hyundai, Sinjeong-dong Seogang GS (538 households) and Gongdeok-dong Gongdeok Samsung (651 households) have recently formed promotion committees to establish associations. It is known that many large construction companies are showing interest in these projects.

Woseong 1st in Jayang-dong, Gwangjin-gu (656 households) is also moving toward signing a construction contract. Posco Construction, which attended both the first and second site briefings, is the leading candidate. Woseong 1st plans to increase the number of households by 98 through remodeling, reaching a total of 754 households.

Notably, within this year, four complexes in Sadang-dong, Dongjak-gu?Woseong 2nd and 3rd, Geukdong, and Sindonga 4th?are expected to select a construction company for integrated remodeling. This is a large-scale project with a total of 5,060 households and is effectively located in the Gangnam area, so many large construction companies are expected to participate. Currently, Lotte Construction and Posco Construction have expressed interest in this project. Residents plan to establish an association in October and start selecting a construction company by the end of the year at the earliest.

The industry expects large construction companies' interest in remodeling to increase for the time being. Given the significantly strengthened regulations on redevelopment and reconstruction projects, such as the price ceiling system for pre-sale, enhanced precision safety inspections, and the excess profit recovery system for reconstruction, remodeling projects are anticipated to enjoy relative spillover benefits.