Conflicts between construction companies and reconstruction and redevelopment associations over high-end brands are escalating, leading to contract terminations and lawsuits. Associations are demanding the use of premium brands to enhance asset value and sales competitiveness, while construction firms are limiting their application due to concerns over brand scarcity and profitability.
As of late June, the application of high-end brands has become a key factor in selecting construction companies for major redevelopment projects. Previously, disputes centered around construction costs and project conditions, but now the choice of brand is emerging as a critical issue influencing member votes and potential changes in contractors.
A notable example is the redevelopment project in the Sangdaewon 2 District of Seongnam, Gyeonggi Province. DL E&C secured construction rights in 2015 and signed a contract with the association in 2021 based on the application of the general brand 'e-Pyeonhansesang.' However, when the association demanded the use of the high-end brand 'Acro,' tensions arose. DL E&C showed reluctance, prompting the association to initiate contract termination and seek a new contractor. In response, DL E&C has pursued legal action.
Similar conflicts have occurred in the Shindang 8 District of Jung-gu, Seoul, and the Heukseok 9 District of Dongjak-gu. In Shindang 8, after disputes over the application of Acro, the association terminated its contract with DL E&C and selected POSCO E&C as the new contractor. Heukseok 9 also ended its contract with Lotte Engineering & Construction over disagreements regarding high-end brands and design changes, opting for Hyundai Engineering & Construction instead. This process increased construction costs from approximately 449 billion won to 650 billion won.
The demand for high-end brands is complicating the selection of contractors. In the redevelopment project in the Machon 5 District of Songpa-gu, the association set conditions for participation based on top-tier brands during the contractor selection process in April, but no construction companies participated in the bidding, resulting in a failed selection. Industry insiders view this as a reflection of the gap between the association's brand expectations and the construction companies' assessments of project viability.
Construction companies are cautious about applying high-end brands because they must manage both brand scarcity and profitability. High-end brands typically involve specialized exteriors, premium finishing materials, and expanded community facilities, leading to higher construction costs. There are concerns that applying these brands universally could dilute their value.
From the associations' perspective, high-end brands are directly linked to project success. Securing a prestigious image is expected to enhance asset values for members and improve competitiveness in general sales. Particularly, as construction costs rise, there is a strong tendency to seek price appreciation through branding and product quality.
As the application of high-end brands expands beyond the Gangnam area to major redevelopment projects in the metropolitan area and other regions, some believe the distinctiveness of existing brands has diminished. Consequently, some associations are demanding unique names or project concepts that reflect the identity of their developments, moving beyond traditional high-end brands. An example is Samsung C&T's proposal of 'Cullinan Apgujeong' during the bidding process for the Apgujeong 4 District. However, Samsung C&T maintains that Cullinan is not a separate high-end brand but rather a project concept for that site.
Lee Eun-hyung, a senior researcher at the Korea Construction Policy Institute, stated, "If construction companies do not apply high-end brands, they may be at a disadvantage in bidding competitions, forcing them to choose between maintaining brand value and expanding contracts. As high-end brands become more mainstream and their scarcity diminishes, there may be a trend toward demanding even higher-tier new brands or unique names for individual projects."
* This article has been translated by AI.
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