Construction costs for major redevelopment projects in Seoul are nearing 16 million won per 3.3 square meters, prompting associations to verify expenses. They aim to distinguish between increases in material and labor costs and expenses related to premium designs and specialized plans. In areas like Eunma Apartment and Mokdong 7th Complex, external experts are being engaged to review design and contract terms in preparation for negotiations with construction firms.
According to Hanmi Global on September 14, the company has formed a consortium with Heerim Architects to serve as the construction management partner for the Eunma Apartment redevelopment project. They will support the pre-construction phase by reviewing design, construction costs, and contract terms, as well as identifying ways to reduce project expenses.
Recently, in key redevelopment areas such as Seongsu, Yeouido, and Apgujeong, construction costs have exceeded 10 million won per 3.3 square meters. The Yeouido Gwangjang Apartment 38-1 district association has set an estimated construction cost of 15.9 million won per 3.3 square meters, excluding value-added tax.
Actual construction costs are also on the rise. The Korea Construction Technology Research Institute's Construction Cost Management Center reported that the construction cost index reached 138.59 (preliminary) in July, marking a 0.18% increase from the previous month and a 5.78% increase from the same month last year. Prices for hot-rolled steel plates rose by 5.68%, while prices for construction metal products increased by 4.02%.
A representative from a construction firm stated, "The primary reason for the rise in construction costs is the increase in material prices, followed by labor costs." They also noted that the implementation of the Serious Accident Punishment Act has led to increased costs related to safety and quality, as well as a shift towards premium strategies.
However, it is challenging to determine whether the construction costs for individual projects are reasonable based solely on the rise in cost indices. Costs can vary even for the same area depending on building height, basement size, construction methods, and finishing materials. It is essential to separate the cost increases from the level of design and products chosen by the associations.
Construction management (PM/CM) plays a crucial role in supplementing the associations' lack of expertise in this process. They review design, construction costs, schedules, quality, and safety, and assist with contracts and negotiations with construction firms. They also conduct value engineering (VE) reviews to lower costs while maintaining necessary performance levels. If additional costs arise during construction, they can assess the reasons and calculations behind them.
A Hanmi Global representative remarked, "Cost verification is typically conducted by the Korea Real Estate Agency, but there are many aspects that require additional verification with expertise internally." They explained that they will also support contract reviews and administrative tasks before construction begins at Eunma Apartment.
Mokdong 7th Complex has recently announced a bid for a construction management service provider to assist in selecting a construction firm. The association's chairperson stated, "We plan to proceed with the final stages of selecting a construction firm, including the bidding guidelines and proposals, as well as a preliminary contract. Defending construction costs is our primary goal."
However, the introduction of PM/CM does not guarantee a reduction in construction costs. Additional service fees may arise, and the effectiveness can vary depending on the firm's scope of work and expertise. When evaluating savings, it is necessary to distinguish whether costs were lowered under the same design and quality conditions or if adjustments were made to finishing materials or facility levels.
Jeon Young-jun, head of the Construction Industry Research Center at the Korea Construction Industry Institute, stated, "Construction managers can compensate for the associations' lack of expertise as clients. They can reduce not only construction costs but also the potential for project delays and ensure that design or construction plans do not proceed unfavorably for the associations through technical reviews."
He added, "There are differences in expertise and capabilities among construction management firms. Smaller projects may find it difficult to invest in costs, so there is a need for various forms of policy support or non-resident consulting to supplement expertise."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.