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Vietnam’s logistics industry: rapid growth in cold storage market

Vietnam’s logistics industry: rapid growth in cold storage market

Monday 14, 03 2022
Vietnam's cold storage market is expected to record a “growth spurt”, and the value of the market may be worth $295 million by 2025.

Huge demand

According to the e-Conomy report of Google and Temasek, in the last two years, the cold storage sector in Vietnam has shown a very strong attraction to industrial real estate investors.

The report of Cushman & Wakefield also noted that a large number of investors are still eager to find opportunities to enter this niche, through new investment projects or mergers and acquisitions.

Ms. Trang Bui, General Director of Cushman & Wakefield Vietnam, said that compared with developed markets in the region, the cold chain market in Vietnam is still quite young and fragmented. However, the growth potential of this segment is huge.

Vietnam logistic

The value of Vietnam’s cold chain market was about $169 million in 2019. In the context of the cold logistics industry booming to serve the needs of vaccine distribution as well as growth in seafood processing and consumer demand, the market is expected to hit the $295 million milestone by 2025. This means that the annual growth would be about 12%.

In addition, the increasing income of the growing middle class also allows consumers to have more access to fresh and quality organic products. As a result, the demand for cold storage increases, promoting investment trends in cold supply chains and new development opportunities.

Assessing the development of this market, Ms. Trang said, the cold storage segment is often located in industrial parks or in river and seaports. The two main branches of the domestic market are commercial cold storage and self-operated cold storage.

This market is more developed in the southern region, largely due to the development of the fisheries and agriculture sectors. In particular, there are many cold storage facilities in Long An province because it is closely connected with the agricultural product basket of the Mekong Delta and is located next to Ho Chi Minh City.

Another remarkable point of this segment is that cold storage has a much higher rental price than conventional dry warehouses. Depending on the type of cold storage equipment (chillers or freezers), rental rates can range from 50% to 100% or even higher. Warehouse rent for chilled and frozen products ranges from 45-90 USD/m2.

The rental price for pharmaceutical storage ranges from 45-160 USD/m2. Pallet rental prices range from 16,000 to 30,000 VND a day, as reported by Cushman & Wakefield. Businesses compete on a variety of criteria including warehouse capacity, number of pallets, fleet of innovative and specialized trucks, temperature range, warehouse network coverage and location.

The rental price

Experts from Cushman & Wakefield also forecast that there will be many M&A deals in the future. Early investors in this industry will receive higher capital returns.

Challenges

However, besides the great potential, to become more competitive, Vietnam's cold supply chain still faces many challenges. Therefore, in the medium and long term, infrastructure development is key to improving cold chain supply, including specialized logistics centers, and intermodal connectivity. In the southern area, Ring Road 3 & 4, highway to Moc Bai border gate and Cai Mep port project, Long Thanh international airport, together with Hiep Phuoc port city will support the growth of the industry in the coming years.

Besides, Vietnam's cross-border trade process, including time and cost, still needs significant improvements. Cross-border transaction costs, including compliance costs and import and export costs, are still less competitive than most countries in the region.

The cold storage market

The cold storage market is expected to experience explosive growth alongside the latest advancements in vaccine development. Even after the pandemic is over, this growth rate will continue to be sustained by a number of factors including increasing consumer demand for perishable foods and the advent of new treatments with more advanced pharmaceuticals.

While the industry is nascent and still considered a niche, that will probably change in the next few years and become a key sector, experts Cushman & Wakefield emphasize.

Source: theleader

Compiled by VietnamCredit

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