Strong development of e-commerce is reshaping Vietnam logistics market: Cushman & Wakefield
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.
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.
- Read More
MBBank’s takeover of weak OceanBank to have limited impact on its credit profile: Fitch
Military Commercial Joint Stock Bank's (MBBank) takeover of Ocean Commercial Bank Limited (OceanBank) will have limited financial impact on the former’s credit profile, Fitch Ratings said Monday.
Banking - Mon, November 18, 2024 | 5:06 pm GMT+7
Win-win philosophy indispensable for sustainable growth: Bamboo Capital founder
A win-win cooperation strategy is not just desirable, but a necessary condition for sustainable development, says Nguyen Ho Nam, founder of Vietnam’s private conglomerate Bamboo Capital Group.
Bamboo Capital - Mon, November 18, 2024 | 4:46 pm GMT+7
Vietnam central bank resumes selling gold after 1-month hiatus
The State Bank of Vietnam (SBV), the country's central bank, on Monday announced that it will reactivate the sale of SJC-branded gold bars to meet market demand.
Banking - Mon, November 18, 2024 | 4:02 pm GMT+7
Vietnam 2nd biggest market of Thai giant Central Retail in Jan-Sept
Thailand’s leading retailer Central Retail earned a revenue of THB37.99 billion ($1.09 billion) in Vietnam in the first nine months of this year, up 0.9% year-on-year.
Companies - Mon, November 18, 2024 | 4:00 pm GMT+7
Singapore firm to invest in $19.7 mln garment factory in central Vietnam
Singaporean-based HGQ ASIA Pte., Ltd will pour nearly VND500 billion ($19.7 million) into building a garment factory in the south-central province of Binh Dinh.
Industries - Mon, November 18, 2024 | 2:23 pm GMT+7
IP developer KBC to raise $236 mln to restructure debts, augment capital
Kinhbac City Development Holding Corporation (KBC), a leading industrial real estate developer in Vietnam, will offer 250 million shares to 11 investors for more than $6,000 trillion ($236.4 million) to restructure its debts.
Companies - Mon, November 18, 2024 | 2:17 pm GMT+7
Vietnam's chemical giant Vinachem targets $500 mln trade turnover with Brazil in 2030
Vietnam’s state-run chemical group Vinachem and Brazil’s major trading firm Oceanside One Trading LLC say they will strive to boost their bilateral trade to $500 million in 2030.
Companies - Mon, November 18, 2024 | 12:32 pm GMT+7
Vietnam may welcome more FDI from US allies in Trump 2.0: broker
More companies from U.S. allies and elsewhere may move more production facilities to Vietnam in the second term of Donald Trump as U.S. President, given the expected intensification of U.S-China trade tension, according to KB Securities Vietnam (KBSV).
Economy - Mon, November 18, 2024 | 12:19 pm GMT+7
Vietnam PM asks Brazil's aerospace giant Embraer to help with air logistics development
Vietnam seeks to build an air logistics center and plans to collaborate with Brazil’s aerospace giant Embraer for the task, says Prime Minister Pham Minh Chinh.
Companies - Mon, November 18, 2024 | 10:45 am GMT+7
Singapore-domiciled TAEL Two Partners struggles to divest from Vietnam taxi operator Vinasun at loss
Singapore-headquartered fund TAEL Two Partners has planned to divest entirely from Vietnamese taxi operator Vinasun at a heavy loss after more than a decade of investment.
Finance - Mon, November 18, 2024 | 10:19 am GMT+7
Vietnam's opportunity in a shifting global EVs market
The global electric vehicle boom presents numerous opportunities for Vietnam's economy, supported by leading technology suppliers like Bühler Group.
Companies - Mon, November 18, 2024 | 10:00 am GMT+7
Vietnam, Brazil elevate bilateral ties to strategic partnership
Vietnam and Brazil issued a joint statement on elevating their bilateral relations to a Strategic Partnership in Rio de Janeiro on Sunday (local time) on the occasion of Prime Minister Pham Minh Chinh’s ongoing trip to the Latin American nation to attend the G20 Summit and join bilateral activities.
Politics - Mon, November 18, 2024 | 8:11 am GMT+7
The Investor to host seminar on removing legal bottlenecks for infrastructure, property investment
A seminar themed “Removing legal bottlenecks for infrastructure and property investment” will be organized by The Investor in Hanoi on Tuesday.
Economy - Mon, November 18, 2024 | 7:52 am GMT+7
State-owned housing developer HUD has new chairman
Dau Minh Thanh, chief of the Ministry of Construction (MoC) Office, has been appointed chairman of the ministry’s Housing and Urban Development Corporation (HUD).
Companies - Sun, November 17, 2024 | 9:34 pm GMT+7
Vietnam private lender LPBank reports $394 mln profit in 10 months
Hanoi-based Loc Phat Vietnam Joint Stock Commercial Bank, or LPBank, logged an after-tax profit of VND10 trillion ($394 million) in the first 10 months of this year, said its leadership at the EGM on Saturday.
Banking - Sun, November 17, 2024 | 3:30 pm GMT+7
Vietnam stock market unlikely to experience further steep declines in next sessions: experts
The probability of continued sharp falls in the Vietnamese stock market over the next sessions is relatively low, barring unexpected geopolitical turbulences that could cause significant volatility, according experts.
Finance - Sun, November 17, 2024 | 1:30 pm GMT+7
- Travel
-
Indian billionaire to visit Vietnam’s Ha Long Bay with 4,500 employees
-
Vietnam in talks on visa exemptions with 15 countries to boost tourism
-
Foreign businesses in Vietnam urge relaxation of visa, work permit requirements
-
AI can be a game changer for Vietnam tourism
-
Google Doodle honors world's largest cave Son Doong
-
Four Vietnam airports to suspend operations as typhoon 'strongest in a decade' approaches