A Study on the Importance of Risk Factors in Logistics Center Development Project

1. CONTENTS (1) RESEARCH OBJECTIVES This study aims to identify the risk factors in logistics center development projects and evaluate their significance, thereby providing guidelines for addressing these risks and mitigating potential pitfalls during the development of logistics centers. (2) RESEARCH METHOD Based on previous studies, the risk factors in logistics center development projects have been categorized into major, mid-level, and sub-level factors. Subsequently, a survey was distributed to experts from developers, construction companies, asset management firms, securities companies, banks, and logistics companies who have direct experience in logistics center development. After collecting the data, the AHP technique was applied to analyze the data and derive key insights. (3) RESEARCH FINDINGS The top 1-3 factors identified are the appropriateness of demand and supply analysis, construction costs due to errors in development project costs, and inappropriate rent levels, as well as poor location selection that does not reflect market preferences. All of these factors belong to the business planning and market analysis segment within the project planning and preparation stage. The top 4-6 factors include risks such as delays in land-use changes and development-related permits, delays in land acquisition, and increases in financial costs for development projects resulting from liquidity shortages and project delays. Finally, the top 7-10 factors are the deterioration of profitability due to rent and operating cost issues, contractors' failure to complete construction and provide guarantees, construction halts due to rising delivery prices or the bankruptcy of affiliated companies, construction stoppages caused by the discovery of cultural assets or environmental contamination, and excessive competition caused by oversupply at the time of sale. 2. RESULTS Logistics center development projects require, first, thorough preparation in business planning and market analysis, including demand and supply assessments, appropriate rent and construction cost estimation, and the selection of locations aligned with tenant preferences. Second, it is essential to prevent delays in permitting from disrupting the development process. Third, ongoing management is necessary to prevent construction halts by contractors.