Strong development of e-commerce is reshaping Vietnam logistics market: Cushman & Wakefield

By Cushman & Wakefield
Tue, March 5, 2024 | 8:08 am GMT+7

Vietnam has grown to become one of the e-commerce markets with the biggest potential in the ASEAN region, Cushman & Wakefield analysts write.

According to the 2020 Southeast Asia e-commerce report by Google, Temasek and Bain & Company, the average growth rate for the 2020-2025 period is 29% and by 2025, the scale of Vietnamese e-commerce will reach $52 billion.

Vietnamese consumers increasingly favor the convenience of online shopping, influencing a wave of shifting storage from retail stores to warehouse space. It can be seen that the strong development of e-commerce is reshaping the logistics market and creating more diverse types of assets, the most prominent of which is urban logistics real estate.

Workers sort goods at Lazada warehouse. Photo courtesy of the government's news portal.

Workers sort goods at Lazada warehouse. Photo courtesy of the government's news portal.

Urban logistics real estate is receiving a lot of attention from the media and investors. This new field is often confused with the logistics city model, although the concept is quite different. Logistics city can be understood as an urban model associated with the development of logistics services as a key economic sector. Normally, logistics cities will be associated with an important type of infrastructure serving logistics services such as international seaports and international airports. Urban logistics is urban-centric, serving mainly consumer needs in cities.

Demographic trends show an increase in last-mile deliveries in urban areas. This is especially true in Vietnam, where nearly 40 million people live in cities. However, urban delivery costs are also increasing, reaching 50% or more of total supply chain costs. Therefore, e-commerce investors are eager to acquire logistics real estate that can reach the inner city within a 30-minute drive. This is also the top priority goal of developers to increase competitive advantage.

Currently, due to expensive land costs and opposition from stakeholders to logistics activities in the city, urban logistics projects are mainly located in the city-fringe or suburban areas. According to data from Cushman & Wakefield, the Southern key economic region recorded a total warehouse supply of about 5.5 million square meters (sqm) of floor space, of which Ho Chi Minh City accounted for about 14% of the total supply. The Northern key economic region recorded a warehouse supply of about 2.2 million sqm of floor space, of which Hanoi accounted for 12% and Hai Phong 26% of the total supply.

The logistics system is the foundation for logistics services, also known as order fulfillment services, consisting of two parts: order processing and transportation to the buyer. Normally, to serve urban needs, logistics zones are divided into three areas from the central core.

Distribution centers and last-mile warehouses are located in Zone 1, within 10km of urban distance or 30 minutes of truck driving, usually located in belt areas approaching cities and provinces. Zone 2 will have sorting centers, concentrated mainly on the edges of the city, next to bus and train stations, airports and other freight solution hubs. Zone 3 is in the inner city with highest density of goods and is mainly used for delivery and pickup points at existing stores, collection points such as lockers and shelves served by a smaller fleet of delivery vehicles.

Retail logistics real estate is usually rectangular, with an area from 3,000 sqm to 7,000 sqm, with 5 docks for pickup trucks. The floor is raised to the height of a truck, the ceiling is 6m high, and there is a spacious area for parking and waiting. Real estate for 3PL and parcel companies requires land with a narrow length, an area from 5,000 sqm to 7000 sqm, with 5 doors for pickup trucks. Many side doors on both sides of the building for trucks to park outside, doors for trucks are also lined up inside, ceiling height is 6 meters.

In HCMC and Hanoi, the scarcity of available land funds and logistics facilities forces developers to take advantage of many different types of real estate, often old buildings or vacant land. Although older buildings have higher risks and are less efficient for activities such as unloading and storing goods; However, logistics warehouse locations near inner-city delivery points are still a top priority for 3PL companies, e-commerce retailers and parcel companies. In some cases, these old buildings are refurbished to relatively better quality, helping service provider deliver goods quickly.

By 2050, the urban area of HCMC is estimated to have 28 - 30 million people, with an urbanization rate of about 90%. Higher urban density means greater obstacles to logistical land use. There is currently a large gap between the required urban logistics space and the actual amount, and closing this gap requires investing time and capital to address barriers to operating logistics services in cities.

Local governments and investors need to strategize for the "urban spatial model." Quantify the total demand for urban logistics space in leading e-commerce markets in Vietnam based on current and future online sales volumes. This method also calculates the ratio of truck volume per square meter of urban logistics; e-commerce revenue statistics such as amount spent per consumer and average number of parcels per order, based on two different truck utilization strategies: truck space optimization and prioritize delivery speed (mainly e-retailers).

HCMC currently has 9,600 businesses registered in the logistics service industry (accounting for 36.7% of the country). The city also accounts for 54% of businesses providing professional logistics services in the country (about 2,700 businesses). However, small and micro enterprises operating logistics activities in the city today still account for a fairly large proportion, about 40 to 50%.

The current priority for e-commerce retailers and delivery companies is to secure one of the few remaining available locations in Zone 1 and 2. However, logistics facilities closer to city centers also face a range of social, economic and environmental challenges, including: Increased traffic volumes and congestion in public spaces; institutional legality and environmental impact assessments; fierce competition in providing convenience and service quality; the emergence of new distribution channels and the increasing complexity of goods; and incorporating innovation into already complex urban supply chains.

In the coming years, there is a possible future scenario with warehouses being built underground, traditional trucks converted to electric vehicles, which can solve concerns from stakeholders regarding noise and air pollution from delivery vehicles.

The urban logistics system is the foundation for urban development. To remain competitive, attractive and environmentally friendly, cities must engage in solutions that reduce the costs and constraints of urban logistics. Focus on investing in developing passenger transport infrastructure, logistics infrastructure, increasing cargo handling capacity, capacity of seaport warehouses, and investing in proactive supply chains to form service supply centers on a regional level.

At the same time, cities will also need to gradually restructure the market share, giving priority to developing rails, inland waterway and air transports to reduce pressure on road transport.

Comments (0)
  • Read More
Brazil’s leading food group JBS eyes turning Vietnam into global production hub

Brazil’s leading food group JBS eyes turning Vietnam into global production hub

JBS, the world’s leading food processing company, is looking to transform Vietnam into a global and regional distribution and production center.

Industries - Wed, July 9, 2025 | 9:51 am GMT+7

Brazilian-backed payment solutions firm Alterosa MK plans expansion in Vietnam

Brazilian-backed payment solutions firm Alterosa MK plans expansion in Vietnam

Alterosa MK, a joint venture between Brazil’s Alterosa Group and MK Group of Vietnam, said it expects to receive more support from the two governments for investment expansion.

Finance - Wed, July 9, 2025 | 9:00 am GMT+7

USD price may reach VND26,400 in Q3, VND26,200 in Q4: UOB

USD price may reach VND26,400 in Q3, VND26,200 in Q4: UOB

Singaporean bank UOB's updated USD/VND projections are 26,400 in Q3/2025, 26,200 in Q4/2025, 26,000 in Q1/2026, and 25,800 in Q2/2026.

Economy - Wed, July 9, 2025 | 8:41 am GMT+7

Vietnam's stock market moving toward sustainability, professionalism: exec

Vietnam's stock market moving toward sustainability, professionalism: exec

The quality of investors in Vietnam has significantly improved as more and more investors start to adopt asset management strategies and disciplined investing, instead of merely engaging in short-term trading, said Nguyen Hoang Yen, chairwoman of Mirae Asset Securities.

Finance - Tue, July 8, 2025 | 11:40 pm GMT+7

Vietnam's credit growth hits record high since 2023

Vietnam's credit growth hits record high since 2023

Vietnam’s total credit outstanding surpassed VND17.2 quadrillion (about $658.31 billion) in the first half of 2025, marking a 9.9% increase from the end of 2024 and a 19.3% rise year-on-year, the highest growth rate since 2023.

Banking - Tue, July 8, 2025 | 11:26 pm GMT+7

Foreign investors net buy for fifth consecutive session

Foreign investors net buy for fifth consecutive session

Foreign investors' transactions on the Ho Chi Minh Stock Exchange (HoSE) continued to be a highlight as they net bought for the fifth consecutive session on Tuesday, to the tune of over VND7,679 billion ($293.88 million).

Finance - Tue, July 8, 2025 | 6:08 pm GMT+7

Northern Vietnam province opens bid for $2 bln tourism-casino complex project

Northern Vietnam province opens bid for $2 bln tourism-casino complex project

Quang Ninh, a coastal province in northern Vietnam, is seeking investors for a large-scale tourism and casino complex valued at VND51.5 trillion ($2 billion) in its strategic Van Don Economic Zone.

Real Estate - Tue, July 8, 2025 | 4:37 pm GMT+7

The Investor to hold seminar on raising investor awareness towards stock market status upgrade

The Investor to hold seminar on raising investor awareness towards stock market status upgrade

The Investor and its Vietnamese-language sister Nhadautu.vn will host a seminar titled “Raising investor awareness towards stock market status upgrade” in Hanoi on July 17.

Finance - Tue, July 8, 2025 | 4:02 pm GMT+7

Many uncertainties over exchange rates: Vietnam's central bank

Many uncertainties over exchange rates: Vietnam's central bank

There are many "unknowns" with monetary policy and exchange rates in the coming time, said Pham Chi Quang, director of the State Bank of Vietnam's (SBV) monetary policy department.

Banking - Tue, July 8, 2025 | 3:53 pm GMT+7

World's largest iron ore, nickel producer wants to expand business in Vietnam

World's largest iron ore, nickel producer wants to expand business in Vietnam

Prime Minister Pham Minh Chinh has asked Vale Group, a multinational Brazilian corporation in the fields of metals, mining, and logistics, expand business in Vietnam.

Industries - Tue, July 8, 2025 | 1:52 pm GMT+7

Vietjet appoints new managing director

Vietjet appoints new managing director

Vietjet Aviation Joint Stock Company (HOSE: VJC) has appointed Nguyen Thanh Son as its new managing director, succeeding Dinh Viet Phuong.

Companies - Tue, July 8, 2025 | 8:10 am GMT+7

First turbine rotor installed at expanded Hoa Binh hydropower plant in northern Vietnam

First turbine rotor installed at expanded Hoa Binh hydropower plant in northern Vietnam

The rotor of the first turbine at the expanded Hoa Binh Hydropower Plant project was successfully installed on Sunday in Phu Tho province, formerly Hoa Binh province, northern Vietnam.

Companies - Tue, July 8, 2025 | 8:07 am GMT+7

Singapore heavily penalizes nine financial institutions for money laundering

Singapore heavily penalizes nine financial institutions for money laundering

The Monetary Authority of Singapore (MAS) has fined nine financial institutions SGD27.45 million ($21.55 million) for breaches related to the 2023 money laundering case involving more than SGD3 billion in assets.

Southeast Asia - Tue, July 8, 2025 | 7:58 am GMT+7

Foreign cash flows push VN-Index past 3-year peak

Foreign cash flows push VN-Index past 3-year peak

With positive sentiment from both domestic and foreign investors, VN-Index on Monday surpassed the 1,400 mark after more than three years. The last time the benchmark index reached this level was on April 19, 2022.

Finance - Tue, July 8, 2025 | 7:28 am GMT+7

Japan's Granja Fujikura eyes developing large-scale, high-tech agriculture in Vietnam

Japan's Granja Fujikura eyes developing large-scale, high-tech agriculture in Vietnam

Granja Fujikura Group wishes to receive favorable conditions in Vietnam to develop large-scale, high-tech agriculture.

Economy - Mon, July 7, 2025 | 11:22 pm GMT+7

Vietnam's Maritime Bank plans 20% stock dividend payout

Vietnam's Maritime Bank plans 20% stock dividend payout

Vietnam Maritime Commercial Joint Stock Bank (MSB) plans to issue up to 520 million shares as stock dividends, equivalent to 20% of its outstanding shares at the record date.

Banking - Mon, July 7, 2025 | 5:30 pm GMT+7