Investors are hot for cold chain logistics
The logistics and warehousing trend for heat-sensitive products promises to stir the real estate industry in 2021
In the time of Covid-19, a majority of industries have had to reduce or halt activities. Despite persistent short term Covid-19 headwind, investors in the logistics real estate sectors are still positive. JLL’s latest report on logistics in Asia Pacific reveals that For Asia Pacific, office and retail rents, plus capital values have declined in 8 out of 10 key markets in 2Q 2020, while logistics rents were largely flat.
JLL’s report also pointed out that e-commerce is a positive tailwind for consumption-driven demand for logistics real estate. Vietnam is currently one of the fastest growing e-commerce markets in Southeast Asia. Revenue from e-commerce is estimated to reach about 13 billion USD by the end of this year. In recent years, the supply chain has become increasingly consumer driven. Delivery speed was already a major factor in the buying decision, with major online retailers offering same day delivery options. Surges in online groceries orders among other essentials have pushed businesses to look for more cold storage space with proximity to their customers.
According to Prnewswire1, the global cold supply chain market is valued at $ 4.7 billion in 2019 and is expected to reach USD 8.2 billion by 2025; growth at an average annual rate is 12.5% in the period 2020-2025. Both domestic and international investors have long been interested the this sector, and they are in need of more cold storage locations closer to customers to serve the growing demand for heat-sensitive products such as cosmetics, food, pharmaceuticals, .... But the driving forces behind the growth of cold supply chains might soon include special health care products like Covid-19 vaccines and other vaccines in the future.
According to JLL’s latest release, all the leading vaccines require very low temperature to remain effective, cold storage for the new Covid-19 vaccines might be the next big thing in supply chain and logistics industry. At the ultra-cold vaccine maker’s manufacturing facilities in Michigan and Belgium, workers will place vaccines in vials, which are then stored in trays. Those trays will go into GPS-tracked cooler boxes filled with dry ice that keep the vaccine colder than the arctic winter. Trucks from the two leading delivery service companies will transport them to airplanes, or directly to hospitals and other vaccination destinations. The complexity and high requirements of the process will pose never-before-seen challenges for the logistics industry, but with that is the promise of major opportunities.
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Trang Bui, Head of Markets, JLL Vietnam, comments on the trend: ‘The Covid-19 epidemic is accelerating automation in the logistics sector and will become a major trend in the near future. Multimodal and cold supply chain for heat-sensitive products such as food, cosmetics or vaccines will require logistics providers to constantly innovate and improve processes and technologies to benefit from these rapidly growing segments of demand.’
JLL experts also shared that in order to achieve growth goals, Vietnam's logistics industry will still have to overcome many challenges. In order for Vietnam to enter the next phase of the industrial/logistics cycle and become more competitive and move ahead of regional counterparts, it is vitally important to continue spending significant amounts on the infrastruc- ture network, including both highways and utility networks, including renewable energy. Also, Vietnam's cross-border trade process, which includes both time and costs, still needs significant improvements. The cross-border trading cost, consisting of documentary 150 compliance and border compliance costs, in Vietnam is 100 less competitive than most of its regional peers.
To download the The Logistics Sector in AP: The Road Ahead, please click here.
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