Groundbreaking Canceled for 'Champions City': What’s Behind Gwangju’s Economic Woes [Real Estate AtoZ]

POSCO E&C and Daewoo E&C Withdraw, Prolonged Absence of Construction Companies
Unsold Homes Surge Sevenfold, Housing Supply Rate at 105%... Oversupply Worsens Amid Weak Demand
Subscription Competition Rate at 0.53 to 1, Among the Lowest Nationwide
Industry: "Shrinking Private Capital, Negative Impact on Other Projects"

The "Champions City" project, which had attracted attention as the largest private mixed-use development in Gwangju, has had its groundbreaking postponed to the first half of next year due to the withdrawal of its construction companies. With POSCO E&C and Daewoo E&C both pulling out of the project in succession, analysts are warning that the slump in Gwangju's real estate market could negatively impact other projects as well.

According to the construction industry on October 5, the "Champions City" mixed-use development project, which was planned for the former Jeonbang and Ilsin Textile sites in Im-dong, Buk-gu, Gwangju, has collapsed after Daewoo E&C, the preferred negotiation partner, failed to pass its internal review. POSCO E&C, which was to jointly construct the project, had already withdrawn earlier, leaving the project currently without a construction company.

"Champions City" was planned as a massive private complex with a total floor area of 298,000 square meters, including 4,315 apartment units, commercial facilities, a hotel, and a park. The project financing vehicle (PFV) includes Shin Young and Woomee Construction as participants, while "The Hyundai Gwangju" has been mentioned as a potential tenant for the retail facility. Due to the absence of a construction company and the need to restructure the project financing, the groundbreaking and sales launch, originally scheduled for October this year, are now expected to be postponed to the first half of next year.

The downturn in Gwangju's real estate market is evident in the numbers. According to the Korea Real Estate Board, as of the fifth week of September, apartment sale prices in Gwangju had fallen by a cumulative 1.96% this year. This is the second-largest decline among the 17 metropolitan cities and provinces nationwide, after Daegu (-3.70%). The number of unsold homes is also rising rapidly. According to the Ministry of Land, Infrastructure and Transport, unsold homes in Gwangju surged nearly sevenfold from 197 units in 2021 to 1,370 units as of August this year. The housing supply rate stood at 105.5% as of 2023, the highest among metropolitan cities nationwide. This means that while actual local demand is lacking, supply continues to accumulate. The number of units scheduled for occupancy next year is 10,524, far exceeding the estimated appropriate demand of about 7,000 units.

The subscription market is also sluggish. According to Real Estate R114, from January 1 to September 10 this year, the average apartment subscription competition rate in Gwangju was only 0.53 to 1. Among the 17 metropolitan cities and provinces, only Jeju (0.48 to 1), Daejeon (0.31 to 1), and Jeonnam (0.21 to 1) were lower than Gwangju. Recently launched complexes have seen even lower competition rates. "The First Daesang," which was offered for sale in September, attracted only 14 applicants for 66 units (0.21 to 1), and "Hillstate Jiseok" drew just 4 applicants for 52 units (0.07 to 1).

Locals in Gwangju are concerned that delays in flagship development projects could further harm the regional real estate market. One real estate industry official said, "The fact that the largest development project in Gwangju is at risk of being derailed is a signal of shrinking private capital. Investor sentiment is weakening, and there is a high likelihood that other private projects will also turn more conservative."