A major U.S. real estate developer has invited South Korean construction firms to take part in a new city project spanning an area comparable to Seoul's Yeouido district. The aim is to bring the high-rise building technology and high-density urban development experience accumulated by Korean builders into the new city. Attention is now on whether this will open a fresh opportunity for Korean firms, which have struggled to enter the U.S. residential development market because of steep local permitting barriers and project risks.
According to the construction industry on the 15th, officials from Flagship Companies, which is developing the large-scale mixed-use city of Utah City in the U.S. state of Utah, recently visited Korea and met with major domestic builders to propose business cooperation. Utah City is a project to transform the former Geneva Steel site in the city of Vineyard, Utah County, into a mixed-use city combining residential, office, commercial and cultural facilities. The land secured so far alone covers 2.83 million square meters, roughly equal to the entire area of Yeouido, at 2.9 million square meters.
Seeking High-Rise Capability and the Transplant of the K-Apartment Model
Flagship Companies approached Korean builders because it judged them to have strong competitiveness and a high level of execution in high-rise building technology and in urban planning design at the scale of a new city. Unlike suburban housing development in the U.S., which has centered mainly on low-rise residential facilities, Korean construction firms have built up experience concentrating large-scale housing along with commercial and convenience facilities on limited sites. Flagship Companies is considering having Korean builders handle design and engineering, construction management (CM) and construction work, and is also reviewing a plan under which Korean firms would independently develop certain districts to create a "Korean-style multi-unit housing complex."
An official at POSCO E&C, which received the cooperation proposal, said the developer "rated Korea's high-rise building technology and urban planning capabilities highly," adding that "beyond technical cooperation, we are reviewing various approaches, including transferring know-how."
In the U.S., Too, New Cities Are Trending Toward Dense Mixed-Use Development
The situation in which Korean builders are being courted from the other side has emerged as the U.S. moves away from low-density suburban development centered on detached houses and demand grows for mixed-use projects that concentrate residential, office and commercial facilities around rail stations. With construction cost burdens rising, the shift is toward supplying housing intensively on limited sites and improving access to public transportation. In effect, a market is opening where Korean builders can put to use the experience they have accumulated in high-rise housing and transit-oriented mixed-use development.
Within the construction industry, expectations around this cooperation proposal run high because it could serve as a turning point for Korean firms to enter the U.S. housing market in earnest, a market that has long had unusually high barriers to entry. Kim Jae-sik, vice chairman of the Korea Housing Association, said it is "an opportunity for a new market to open, starting with cases of exporting 'K-apartments' to the U.S. market."
The strength local developers point to in Korean construction firms is their ability to efficiently develop and build large-scale high-rise multi-unit housing. They assess the "K-apartment" — combining not only the apartment buildings themselves but also landscaping, community facilities and smart home systems — as a complete residential product. There are companies in the U.S. with supertall building technology as well, but Korean builders are seen as having accumulated capabilities in process, cost and quality management by repeatedly delivering large-scale high-rise multi-unit housing.
Nate Hutchinson, co-chief executive of Flagship Companies, told Seoul Economic Daily: "We want to build a long-term partnership by combining Korean companies' technology and experience with our land and local development capabilities." The executive added that the company is "discussing cooperation not only with construction firms but also with Korean companies that have smart city and energy technologies."
Blocked by Rules That Differ by State, but Is the Threshold Lowering?
Overseas orders won by Korean builders have so far been concentrated in plants and other industrial facilities, with housing projects a relatively small presence. According to the Overseas Construction Integrated Information Service, industrial facilities accounted for 79.2% of last year's total overseas construction orders of $47.27 billion, while the building segment, which includes housing, came to about 4%.
Entering the U.S. housing market also comes with high barriers. Construction laws and licensing systems differ by state, requiring firms to secure local construction licenses, workers and subcontractors. There is also a risk that projects will be delayed or fall apart during land rezoning, urban planning approval and community consultation. One construction industry official said that "in some states, performance bonds on a scale equal to the project cost are required," explaining that "a local partner's financing ability and project execution capability are important variables."
Daewoo Engineering & Construction signed a memorandum of understanding (MOU) with a local developer in the city of Prosper, Texas, last September and pursued a mixed-use development project of townhouses, a hotel and offices, but recently halted the project because of the local developer's funding problems and other issues. Instead, in Palisades Park, New Jersey, it is pursuing a project with a local company to develop an 18-story, 540-unit multi-unit housing complex at a total project cost of about $291 million.
A model in which builders draw on their design and construction experience in high-rise housing to take part from the early stages of a development project and share in the profits is also emerging as a new approach to overseas expansion. Hyundai Engineering & Construction is pursuing a structure in which it invests equity in a 260-unit build-to-rent (BTR) housing development in Chatswood, Sydney, Australia, and takes part in design and technical review and construction management (CM). A local company handles construction and rental operations, while Hyundai Engineering & Construction shares in development and rental income based on its technology and project management capabilities.
Incentives for High-Rises Near Rail Stations
Against this backdrop, Utah is drawing attention as a new testing ground for Korean builders to enter the U.S. housing development market. Under development guidelines released by the city of Vineyard in 2022, areas adjacent to the FrontRunner commuter rail station are subject to urban planning that sets no upper limit on development density. For the area south of the rail station, height limits have also been removed. In effect, development conditions have been created in which Korean builders with ample experience in high-rise housing and mixed-use development can demonstrate their technical capabilities. Hutchinson noted that "even for high-rise buildings, building permits are completed within six months," adding that Utah has a large young population and that labor unions there are not strongly organized.
Utah's rapid growth and its hosting of the 2034 Salt Lake City Winter Olympics are also factors supporting development demand. Utah's population stood at 3,551,150 last year, up 44,351, or 1.3%, from a year earlier. Utah County, where Utah City is being built, saw its population rise by 15,914, or 2.1%, over the same period, accounting for about 36% of the state's total population increase.
The construction industry expects that through cooperation with local developers, Korean builders can expand into the U.S. market by moving beyond simple contracting to take part from the early stages of development projects and share in the profits. One academic specializing in construction said that "since Korean builders' high-rise construction capability has already been proven, the key is to secure local partners and partner networks to reduce project risk."