E-commerce is the primary driver of demand for logistics real estate, logistics services, and industrial cold storage. Viet Nam is currently one of the fastest-growing e-commerce markets in Southeast Asia, with an estimated annual revenue of $13 billion.
This means that more people will be staying at home and more customers be shopping online. Industrial cold storage must diversify its product offerings and prioritise safety, as it is not just about dry goods but also includes frozen products and temperature-sensitive items like pharmaceuticals and vaccines. This expansion of the market has driven the demand for enhanced services.
Industrial cold storage will be a bright spot in the future of logistics
Rapid urbanisation and the growth of the middle class are key drivers of the expansion of logistics services. Approximately 35% of Viet Nam’s population now lives in urban areas, up from 29% over the past decade.
As the market begins to develop, demand on shopping is likely to increase, which will raise the demand for logistics services and industrial cold storage. It is expected that Viet Nam’s substantial middle class, along with rising income levels, will promote consumption in the region.
For instance, Lazada, one of Viet Nam’s top three e-commerce companies (alongside Tiki and Shopee), has invested in three department stores with a total area of 22,000 square metres in Ho Chi Minh City, Da Nang, and Ha Noi, as well as a network of 34 distribution centres nationwide.
Overall, e-commerce companies utilise more logistics space than traditional retailers. This is primarily due to a wider variety of products, larger volumes, and a higher demand for cross-border logistics and two-way logistics (exchange and return processes).
E-commerce currently accounts for about 20% of total retail revenue in the Asia-Pacific region and 14% globally. Several consultancy firms in the industrial real estate sector have also received numerous requests from major e-commerce clients for leasing warehouses near urban centres, with areas of 10 to 15 hectares— a trend likely to strengthen their market position in the coming years.
The pandemic has accelerated the process of automation in logistics, which is set to become a major trend in the near future. Growth in other industries will also support the expansion of the three-party logistics market, including growth in food and beverage, healthcare and pharmaceuticals, and other key industries.
Industrial cold storage will become the logistics star of the future, as more consumers shop online nowadays. The pandemic has required more cold storage close to customers. Increasing short-term demand for logistics directly related to the immediate impacts of the pandemic, especially the demand for online shopping.
The healthcare sector is more reliant on industrial cold storage than ever for the purchase and storage of vaccines. Should a widespread vaccination programme be launched, industrial cold storage will be essential. All leading vaccines require very low temperatures to maintain efficacy, and issues regarding vaccine loops and cold storage could drive significant growth for the supply chain and logistics sectors.
To achieve growth targets in the near future, the logistics industry in Viet Nam must continue to face several challenges. Firstly, for Viet Nam to elevate its logistics industrial development within the supply chain, competitive industrial cold storage must even outpace other countries.
Viet Nam needs to maintain adequate investment in infrastructure, focusing on developing both the road system and public network services, including renewable energy. The process of cross-border trade in Viet Nam, including both time and costs, also requires significant improvement. Currently, the costs associated with cross-border transactions, including compliance and import/export documentation, render Viet Nam less competitive compared to most countries in the region.
Factors Influencing Industrial Cold Storage
Numerous factors impact the operation of industrial cold storage to ensure efficient operation. The first key feature to consider is temperature control. Depending on the type of goods, the storage temperature needs to be consistently maintained. Factors affecting logistics services and industrial cold storage include:
Time and Compliance
The first factor influencing the operation of an industrial cold store is operational efficiency. To achieve this, cold logistics managers must adhere to fundamental principles, namely time. Different types of food require varying storage temperatures, so they must pay attention to the characteristics of the food to adjust temperatures accordingly.
Material Quality of the Cold Store
This is a primary factor influencing the cost of industrial cold storage. There are two main types of cold room partitions on the market: EPS panels (density 18-25kg/m³, commonly used in construction and warehouses) and PU panels (density 45-48kg/m³ for cold storage). The density of the materials affects the insulation and heat retention capabilities of cold storage.
The Door of Cold Storage
Industrial cold storage doors have various sizes, with each size affecting the cost of the cold storage facility. Within the same cold storage module, the size can be adjusted, thus altering the price. Beyond the material, the design style also significantly impacts the cost of renting industrial cold storage.
Currently, cold store doors are generally made of stainless steel 304, which offers excellent strength and rust resistance. Accompanying accessories include:
– Hinged Cold Store Doors: Typically used in mini cold storage facilities and small areas, where goods are moved manually or with light manual forklifts. Smaller doors help save costs and prevent heat loss when entering or exiting.
– Sliding Cold Store Doors: Used in larger cold storage installations within companies with significant product import volumes, supermarkets, and large vehicles.
– Roller Cold Store Doors: Often utilised in industrial cold storage to optimise the lifting and gravitational compression mechanism of the door. Typically operated by gravity, these doors automatically open when a truck (container) backs up to the door.
Refrigeration Systems in Cold Storage
The refrigeration system within industrial cold storage is another factor that can lead to significant price differences, playing a vital role in the operational quality of the facility, alongside factors such as origin, brand, model, and machine age.
Cold Storage Operators
To ensure optimal operation of the cold storage, the role of the operators is irreplaceable. Cold storage operators must always have contingency plans, as they may not know what is happening or could happen within the cold store. However, having contingency plans in place allows for proactive incident management.
Operators also need to automate their management processes. Simultaneously, it is essential to manage the temperature range of your cold storage as tightly as possible. Automation streamlines operations, making management easier and quicker.
Factors Affecting Cold Storage Construction Costs
The question of cold storage construction costs is a primary concern for clients. According to experts in the field, pricing for cold storage is influenced by many factors. These factors affecting cold storage prices include:
Scale of Cold Storage
Once a contractor for the cold storage installation has been selected, the investor should request a detailed breakdown of construction costs. The contractor will inform you of the scale of the facility being built, allowing you to calculate the total costs of constructing the storage framework.
Functionality of the Cold Storage
Investment costs for cold storage vary significantly depending on the intended use. Using cold storage solely for the preservation of goods and products can save investors substantial amounts. Many construction costs, as well as machinery and equipment expenses, can vary. Moreover, depending on the intended functionality, the construction of the storage facility will also change. Simpler construction methods can lead to quicker processes and additional cost savings.
Products Requiring Cold Storage
Depending on whether the products stored in the cold storage are groceries, food items, or seafood, the type and cost of cold storage construction will need to be appropriately invested. If the products are more perishable, multiple refrigeration units must be installed to maintain stable temperatures within the facility, increasing construction costs.
Conclusion
Cold storage is a sealed space or warehouse built for the purpose of storing goods and products. The objective of cold storage is to minimise product spoilage over time. The method of lowering temperatures in cold storage inhibits the growth of bacteria and the decomposition of products, allowing items to remain viable for longer and maintain optimal quality over extended periods.
Cold storage for food is an essential piece of equipment for restaurants, hotels, supermarkets, freezers, hydroponic facilities, dairy products, groceries, seeds, and other items. These products must be stored in cold environments to ensure quality and lifespan.
Therefore, poorly constructed cold storage with incorrect specifications will lead to a facility that cannot fulfil its primary function of preserving products, resulting in higher production costs with lower efficiency.
Savills Industrial – Leading Provider of Industrial Real Estate in Viet Nam
Savills Industrial Viet Nam is one of the foremost providers of industrial real estate in Viet Nam. Savills Industrial can help you determine whether the rental prices for cold storage or industrial properties are reasonable in today’s market. Savills Industrial ensures that all terms are market-appropriate, thanks to a top-tier technical team in Viet Nam, providing consultancy services from industry experts with extensive knowledge.
