…Songdo has been a financial disappointment for its developer, a venture of U.S. developer Gale International and Posco Engineering & Construction.
The venture has gotten fees and has been able to get back the equity it put into the project, less than $100 million. But other than that, the developer hasn’t earned any profits for the 12 years of work
The developers say the main cause of Songdo’s disappointing financial results is the global financial downturn, which made financing scarce and slowed demand for retail and office space. While Songdo’s condominiums have sold well, about half of the commercial space in Songdo’s gleaming office skyscrapers is empty because the business district has struggled to attract tenants.
…..demand for office space was slower. Gale officials say one of the problems with filling office space all along has been that government incentives have been available for foreign companies but not for domestic companies. That has made it difficult for Songdo to attract law firms, accounting firms and other service companies that the foreign companies need.
“If you don’t have a thriving domestic economy in that area, it’s going to be more difficult to attract international investors,” says Tom Murcott, a Gale executive vice president.
But mayors and government officials in other parts of the country didn’t want their tenants lured away. “Clearly you can’t give such tax favors to each and every company,” says Ryu Young-yong, a director at the Ministry of Trade, Industry and Energy. “It relates to a matter of fairness with other Korean companies operating in other parts of the country.”