Foreign Investors Snap Up Korean Distribution Centers — Were They Anticipating a Supply Cliff and Rapid Automation?

Foreign Institutional Investors Snap Up Korean Distribution Centers
Supply of Distribution Centers Has Fallen Sharply in Recent Years, Signaling an End to the Oversupply Era
Rapid Automation May Also Be Fueling Investor Demand

The flow of capital in Korea’s distribution center market is shifting. After the real estate project financing crisis, domestic investors have sharply reduced new investments, allowing foreign capital to expand its presence. Market analysts say global institutional investors are betting on the correction of oversupply and the growth potential driven by automation.

Foreign Capital Floods Into Korea’s Distribution Center Market

According to the investment banking industry on the 20th, foreign institutional investors have been acquiring major distribution centers and development sites across the Seoul metropolitan area since last year. After the project financing crisis triggered widespread EOD events among domestic securities firms and asset managers, Korean investors have largely withdrawn from new development projects—creating space for overseas capital to move in.

Blackstone purchased the Gimpo Seonggwang distribution center in November last year for about $62 million, and in July acquired two additional centers in Gimpo Gochon and Namyangju Hwado. The properties, which house tenants such as GS Networks and Coupang, were reportedly bought for $266 million. Blackstone first entered Korea’s distribution center market in 2016 by acquiring five centers in the southeastern region, but sold them all in 2020 amid overheated competition during the pandemic. The firm has now returned to the sector after five years.

German asset manager DWS also participated in the bidding for the Gonjiam distribution center in Gwangju, Gyeonggi Province, and was selected as the final buyer in July. Global private equity firm Warburg Pincus purchased the Samsung Logis center in Anseong in March and plans to develop two more centers expected to be worth $500 million upon completion. U.S.-based Oaktree Capital, the world’s largest distressed-debt investor, acquired its first Korean distribution center in March—located in Hoeeok-ri, Icheon.

More recently, a consortium led by KKR and Create Asset Management was selected as the preferred bidder for the Incheon Cheongna logistics center, with a purchase price in the $750 million range. KKR is also seeking mid-to-large-size centers in the Hwaseong and Anseong areas. M&G, Morgan Stanley, and Hines have begun blind-fund–based investments, while PGIM and Warburg Pincus are reviewing additional distribution center opportunities in Korea.

Supply–Demand Balance Returning in Distribution Centers

Foreign investors are accelerating their purchases of distribution centers on expectations that the oversupply seen in recent years will ease. Development surged between 2018 and 2022, when e-commerce volumes jumped during the pandemic. New supply reached 3.97 million square meters in 2022—double the previous year—and climbed further to around 5.95–6.29 million square meters in 2023 and 2024. But projected supply for this year has dropped sharply to just 0.99–1.32 million square meters. Rising construction costs, high interest rates, and tighter project financing conditions have delayed new starts across the market.

According to CBRE Korea, as of August, 172 Grade-A distribution center projects in the Seoul metropolitan area—totaling 12.36 million square meters—have been delayed for more than a year. Of these, 81% are now three years past their building-permit approval. Many projects have been halted due to delays in ownership transfers, failed financing, or incomplete development structures. Some have entered auction processes or been reclassified as distressed assets. CBRE Korea expects that, given these conditions, new supply in 2026–2027 could fall below 5% of the current market size.

Demand, however, remains resilient. Third-party logistics (3PL) operators and e-commerce companies continue to expand, while Chinese e-commerce platforms such as AliExpress and Temu are accelerating their push into the Korean market. Industry sentiment has also turned more optimistic. In a July survey conducted by GenStarMate of around 70 professionals at major real estate investment and asset management firms, 47% expected a recovery in the distribution center market in the second half of the year—surpassing recession expectations (36%) for the first time since early 2022.

Automation Spreads Across Korea’s Logistics Industry

Some analysts say investors are also betting on market growth driven by advances in automation. Automation adoption in Korea’s logistics sector has been rising rapidly. Robots are now capable not only of moving goods but performing complex sorting tasks, making automation essential for improving service quality and maintaining competitiveness. According to the Ministry of Land, Infrastructure and Transport, 49 distribution centers in Korea had received “smart logistics center” certification as of last year. The certification offers administrative and financial benefits to warehouses equipped with AI-based cargo handling and automated systems.

The concern is that this trend could deal a heavy blow to the labor market if it accelerates further. As manufacturing and construction have weakened, jobs in factories and on construction sites have declined sharply, making distribution centers an increasingly important source of new employment. According to employment insurance data from the Ministry of Employment and Labor, manufacturing employment insurance subscribers totaled 3.844 million last month, down 14,000 (0.4%) year-on-year. Excluding foreign worker increases under the employment permit system, the decline widens to 29,000. Construction employment insurance subscribers fell by 17,000 over the same period, marking 27 consecutive months of decline.

In contrast, the number of employment insurance subscribers in services rose to 10.947 million, up 227,000 (2.1%) from a year earlier. Healthcare and welfare led the increase, while transportation and warehousing also grew 2.3%, showing notable expansion. If automation becomes widespread across the logistics industry, the sector’s growth could accelerate—but a large number of low-barrier jobs may disappear, heightening instability across the broader labor market.