Shingil 2 District Raises Construction Cost by 300,000 KRW per 3.3㎡ After One Failed Bid
Consortium Ban Removed...Samsung C&T and GS Construction Show Interest
More Associations Adjust Construction Costs as Selective Contracting Strengthens
Redevelopment and reconstruction associations are going all out to attract construction companies by increasing construction costs or changing consortium restrictions among builders for contractor selection. The Shingil 2 District, where contractor selection failed once last month, has also changed the construction costs and eased conditions to attract major construction companies.
On the 26th, the Shingil 2 District Redevelopment Maintenance Project Association announced a contractor selection bid notice containing these details and will hold a site briefing session on the 30th. The contractor bidding will take place on October 15.
Increasing Construction Costs and Easing Bidding Conditions
The announced estimated construction cost in this notice is a total of 1.1124 trillion KRW, with a construction cost of 7.8 million KRW per 3.3㎡. This is an increase from the 7.5 million KRW per 3.3㎡ announced in May, re-entering the bidding with higher costs. The construction cost was raised by 300,000 KRW this time, including the previously excluded fire protection construction costs from the initial announcement.
After the previous announcement, 10 construction companies including Samsung C&T, GS Construction, Hyundai Construction, Daewoo Construction, and Lotte Construction participated in the site briefing session held on May 31, but none actually participated in the contractor bidding, resulting in a failed bid.
The Shingil 2 District Association, when re-announcing the contractor selection, removed the 'no consortium allowed' clause, unlike before. A representative of the Shingil 2 District Association said, "The real estate market is recovering, and above all, for the apartment brand directly linked to price, it was judged that having a major contractor is a top priority. We thought it would be a waste of time if the bid failed again, so we gathered opinions, went through the delegates' meeting, and re-announced with 80% consent."
As the Shingil 2 District Association changed construction costs and bidding conditions, construction companies are also showing active willingness to participate in the bidding. Both Samsung C&T and GS Construction, who were interested in winning the Shingil 2 District project, showed positive attitudes toward bidding. A Samsung C&T official explained, "With construction costs at around 7.8 million KRW per pyeong, it seems worth trying, so we plan to actively participate this time." A GS Construction official said, "We plan to attend the site briefing session and consider the changed construction cost conditions positively, as they are not a reason to refrain from bidding."
With the removal of the no consortium requirement, there is also a possibility that two construction companies may form a consortium to participate instead of competing bids. A Shingil 2 District Association official said, "No one participated in the previous bid, so we changed the conditions, and whether to bid as a consortium is up to the construction companies." When two or more construction companies win as a consortium, there can be differences in apartment quality after completion, but the association judges that rushing contractor selection is more beneficial.
Shingil 2 District is located between Sindorim Station and Shingil Station on Line 1, and is a project to build a total of 2,786 households in the area of 190 Shingil-dong, Yeongdeungpo-gu, Seoul, with buildings ranging from 4 basement floors to 35 above-ground floors. The association aims to obtain project implementation approval within the year and plans to pursue a plan to change the maximum floor height to 49 floors.
"First, Contractor Selection" Associations in a Hurry
Like Shingil 2 District, many associations that failed to select contractors are changing conditions and seeking contractors again. This is because construction companies are selectively entering redevelopment projects. Even if they attend site briefing sessions, they sometimes do not submit letters of intent to bid or give up on projects that do not meet their internal standards. Construction companies are carefully assessing project feasibility amid rising material and labor costs and high interest rates. Rather than enduring cutthroat competition through competitive bidding, cases of forming consortiums and proposing to associations are increasing.
In the case of Gajaeul 7 District, after re-announcing in June, the construction cost was raised from 7.7 million KRW to 8.435 million KRW per 3.3㎡. Despite announcing bids three times, no contractor was selected, so the consortium bidding prohibition clause was lifted, and they are pursuing a private contract with a consortium of Hanwha Construction Division and GS Construction.
Jamsil Woosung 4th raised the construction cost from 7.6 million KRW to 8.1 million KRW per 3.3㎡ after the third contractor selection announcement and finally selected DL E&C as the contractor. Shinbanpo 27th also announced a construction cost of 9.08 million KRW per 3.3㎡ in January but failed due to no bidders, then increased the cost to 9.58 million KRW per 3.3㎡ and re-announced, selecting SK Ecoplant as the contractor.
In the case of the public redevelopment site Geoyeosaemaeul, after two failed contractor selections, a consortium of Samsung C&T and GS Construction was selected as the contractor on the 10th under the condition of maintaining construction costs.
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