"No More Blind Bidding"... Even Prime Seoul Project Sites 'Fail to Attract Bids'

It seems that the era of construction companies’ ‘blind bidding’ in redevelopment projects is over. Even prime redevelopment sites in Seoul worth trillions of won are failing to attract contractors, resulting in repeated bidding failures. This is interpreted as construction companies becoming more selective in their bids, carefully assessing project profitability due to concerns over worsening profitability caused by the sluggish construction market and rising raw material costs.

[Image source=Yonhap News]

According to the redevelopment industry on the 23rd, the selection of a contractor for Noryangjin District 1 recently failed as no construction companies participated in the bidding. Although seven companies, including Samsung C&T and GS Engineering & Construction, attended the site briefing held in September, which had raised expectations of a fierce bidding competition, none submitted a bid proposal.

Noryangjin District 1 has been regarded as the ‘biggest catch’ in the second half redevelopment projects, with construction costs exceeding 1 trillion won. Upon completion of redevelopment, it is planned to be developed into a large complex with 28 buildings, 2,992 households, ranging from four basement floors to a maximum of 33 floors above ground. Among the total 9,100 households in Noryangjin New Town, it is a large-scale project with excellent location near Noryangjin Station on subway lines 1 and 9 and Jangseungbaegi Station on line 7, making it a highly competitive site for major construction companies.

The industry views the construction cost proposed by the association as the cause of the bidding failure. The association initially proposed a construction cost of 6.95 million won per 3.3㎡, later raising it to 7.3 million won. However, construction companies judged the cost to be low compared to the association’s project conditions, which demanded high-end features, and thus did not submit bids.

Yeouido Gojak Apartment also failed to attract bids after Daewoo Engineering & Construction participated alone in the first bidding in September. Ahead of the second bidding, a site briefing was held with participation from Daewoo Engineering & Construction and Dongbu Construction, raising expectations of a competitive bidding process, but again only Daewoo Engineering & Construction submitted a bid alone, resulting in failure. The Yeouido Gojak Apartment reconstruction project involves demolishing the existing 373 households in Yeouido-dong 21-2, Yeongdeungpo-gu, and constructing three apartment buildings with five basement floors and 49 floors above ground, totaling 570 households, along with neighborhood living facilities.

The industry attributes the conservative bidding approach of major construction companies to rising construction costs. According to the Korea Institute of Civil Engineering and Building Technology, the construction cost index (provisional) in September was 153.67, up 2.44 points from 151.23 in August. Compared to the same period three years ago (119.89), it rose by 33.78 points. Considering future high interest rates and inflation, additional costs are likely to increase, and with the prolonged housing market downturn, companies find it difficult to readily submit bids.

The industry expects such bidding failures to expand. A representative from a major construction company said, “In a situation where it is uncertain how long raw material and labor cost increases will continue, it is difficult to enter even large projects if profitability is not secured.” He added, “Concerns about project financing (PF) insolvency continue to arise, and as anxiety over funding shortages grows daily, there is a prevailing atmosphere that even projects with good profitability must be approached more cautiously than in the past.”

This content was produced with the assistance of AI translation services.