Seoul is accelerating its urban renewal and redevelopment efforts through rapid integrated planning and increased floor area ratios. However, many projects are experiencing a lack of competitive bidding during the contractor selection phase. This trend is attributed to construction companies weighing profitability and the likelihood of securing contracts against rising construction and financing costs. The repeated failures and re-bidding processes are also putting pressure on the speed of supply.
As of the end of July, there are 311 sites designated for rapid integrated planning in Seoul. By the end of August, planning has been completed for 197 sites, including areas around Sinjeong 4-dong and Sadang-dong.
Seoul is working to shorten the planning period and expand floor area ratio incentives in areas lacking profitability. In the Sinjeong 4-dong area, a profitability correction coefficient of 1.63 will be applied to develop 2,170 housing units, while a coefficient of 1.17 will be used in Sadang-dong for 970 units. The city aims to start construction on 310,000 housing units by 2031.
As of August 10, among the 25 urban renewal projects secured by the top 10 construction firms in Seoul, only three projects—Apgujeong 5 District, Shinbanpo 19 and 25, and Seongsu Strategic Maintenance Area 4—saw multiple bidders. The remaining 22 projects (88%) were awarded without competition.
Even large-scale projects are not immune to this trend. The reconstruction of the Yeouido Shimbun Apartments, with a total construction cost of 2.16 trillion won, failed to attract any bidders in the first round, with only Samsung C&T participating. Although seven construction firms attended the initial site briefing, only one remained for the actual bidding. In the second site briefing on September 3, Samsung C&T was again the sole participant. The estimated construction cost is set at 1.15 million won per 3.3 square meters.
The Mokdong 10 Complex, with a total construction cost of 2.61 trillion won, also saw Hyundai Engineering & Construction as the only participant in two bidding rounds, leading to a shift to a negotiated contract process. Hyundai was selected as the preferred bidder on August 26, with an estimated construction cost of 990,000 won per 3.3 square meters and a bid deposit of 60 billion won. The Seongsu 3 District redevelopment, valued at 1.83 trillion won, also faced two failed bids with only Samsung C&T participating.
This situation contrasts sharply with the past, when two to three construction firms would compete fiercely, offering exceptional conditions such as deferred payment of contributions and relocation support. This year, in Apgujeong, Hyundai secured District 3 and Samsung C&T secured District 4 through single bids.
According to the Korea Construction Technology Research Institute, 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, setting a record high. Construction costs have risen by 38.6% compared to 2020.
Additionally, companies must prepare hundreds of millions of won in deposits from the bidding stage, along with significant costs for specialized designs, financial proposals, and bidding personnel. If they fail to secure a contract, recovering design and promotional costs becomes difficult, leading firms to shy away from projects perceived as low probability from the outset.
Improving the profitability of the project for the association does not directly translate to improved profitability for the contractor. While increasing the floor area ratio and profitability correction coefficients help reduce the burden on association members by increasing the volume of general sales, contractors must separately consider construction costs, financing costs, construction duration, and marketability. The need for re-bidding and negotiations for negotiated contracts further extends the time required for contractor selection.
Lee Eun-hyung, a researcher at the Korea Construction Policy Institute, stated, “Due to the prolonged high interest rates and rising construction costs, construction firms are increasingly avoiding reckless bidding competition. They are adopting a strategy of selective bidding to focus on projects with higher profitability.” He added, “Given that construction cost issues are unlikely to ease in the near future, the trend of selective bidding is expected to continue.”
* This article has been translated by AI.
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