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Demand for cold storage facilities grows with e-commerce popularity

Cold storage might soon become a rising star in the logistic sectors, property market researcher Jones Lang LaSalle (JLL) Vietnam has said.

It told a seminar held last week to discuss trends in logistics that investors are already partial to cold storage facilities after online grocery sales skyrocketed during the pandemic, requiring more refrigerated warehouses close to buyers.

“There has been a spike in short-term logistics requirements directly linked to the immediate impact of the pandemic, particularly in relation to the significant expansion of online grocery spending, and the need to support critical health services such as vaccines distribution.”

Since all leading vaccines require very low temperatures to remain effective, cold storage for the new COVID-19 vaccines might be the next big thing in the supply chain and logistics industry.

Another trend seen in the market is automation.

Trang Bùi, head of markets, JLL Vietnam, said: “The COVID-19 pandemic is accelerating automation in the logistics sector and will become a major trend in the near future.

“Tenants are upgrading from outdated, often small and owner-occupied facilities, to newer facilities in premium locations. Simultaneously, the consolidation of logistics operations into more modern facilities is improving efficiency and reducing the overall logistics costs of tenants. Growth in other industries will also support three-party-logistics market expansion, including growth in the food and beverage, healthcare and pharmaceuticals and office and technology equipment industries.”

Rapid urbanisation and the growing middle class are among the biggest drivers of growth. Demographic forces drive demand for commercial real estate, and this is a major factor that underpins demand in Vietnam, and the Asia Pacific in general.

Around 35 per cent of Vietnam’s population currently lives in urban areas, up from 29 per cent just about a decade ago. As the market matures, the level of logistics space required to serve the population is likely to rise, leading to greater requirements for logistics space.

E-commerce is likely to drive demand for logistics real estate. Typically, e-commerce firms use more logistics space than brick-and-mortar retailers largely due to a more extensive product range, greater inventory levels, larger outbound shipping space requirements, and increased reverse logistics

In recent years the supply chain has become increasingly consumer-driven. Delivery speed has always been a major factor in the buying decision, with major online retailers offering same-day delivery options.

To keep ahead of the curve, retailers and logistics providers need to respond to changing customer needs.

In order to achieve growth goals, Vietnam’s logistics industry will have to overcome the many challenges that remain. For Vietnam to enter the next phase of the industrial/logistics cycle, become more competitive and move ahead of regional peers, it is vitally important to continue investing in infrastructure, both highways and utility networks, and renewable energy.

Also, Vietnam’s cross-border trade process still needs significant improvements in both processing time and costs.

According to the 2020 Vietnam Logistics Report by the Ministry of Industry and Trade, the global logistics sector has been seriously affected by the COVID-19 pandemic. Although governments work to maintain the supply chain of goods and give priority to the circulation of essential goods, due to disease control measures like social distancing and work-from-home orders, there are times when most commercial markets are paralysed.