The increasing demand for fresh food and e-commerce is serving as the main driving force of the domestic cold storage market – a niche segment of logistics that is expected to grow in the future.

According to Savills Vietnam, the first commercial cold storage in Việt Nam was built in 1996 by Konoike VinaTrans, a logistics joint venture between Konoike Transport Co Ltd of Japan and three Vietnamese companies.  

However, Việt Nam’s cold storage landscape is localised and highly fragmented, with over 40 projects providing a total of 460,000 sq.m of cold chain warehouse space in 2022.

In fact, the country’s fresh food sales surged from US$40.4 billion in 2020 to $45.7 billion last year, a compound annual growth rate (CAGR) of 6.3 per cent.

Its e-commerce market also witnessed a remarkable annual growth rate of 21.5 per cent from 2017 to 2022, fueling the expansion of all kinds of complementary services.

Thomas Rooney, Senior Manager of Industrial Services at Savills Hanoi, said domestic companies provided the most new supply. At the end of 2022, An Việt, Phan Duy, Hùng Vương and ABA Cool Trans were the leading cold storage suppliers, however, foreign companies, such as Lineage Logistics, SK Logistics, and Lotte Logistics were also actively expanding their presence in the market.

Nonetheless, demand continued to outstrip supply in Việt Nam, with the rise of e-commerce platforms placing immense pressure on cold storage capacity. The overall market occupancy rate stood at around 88 per cent at the end of 2022, with major markets such as HCM City, Bình Dương, Long An, and Bắc Ninh provinces hovering over 90 per cent, Rooney pointed out.

According to Savills, most existing stock is concentrated in HCM City and its surrounding provinces, such as Bình Dương, Long An, and Đồng Nai, which together account for 87 per cent of the total.

Rents for cold storage warehouses vary greatly across the submarkets, as the more developed facilities with better value-added services in HCM City command much higher rental levels, almost double those of other regions. On average, prime cold storage warehouse rents in Việt Nam often fall in the range of US$22 (Bắc Ninh) to $50 (HCM City) per tonne.

Many experts and businesses believe that the domestic cold storage market will have to encounter more challenges in order to advance to the next stage in the process of industrial logistics development, requiring service providers to constantly take innovations and reforms in both operation and technology.

Rooney said that a well-located, well-designed automated warehouse would outperform conventional competitors from an operating cost perspective, and the market would see more transactions and greater institutional involvement ahead.

In fact, foreign investment funds are pouring much capital into cold storage construction in Việt Nam due to its attractiveness and large potential. Along with cold storage, cold transport – refrigerated container – is also facing a lot of competition amid rising supplies. Businesses have switched from regular containers to investing in more than 500 refrigerated containers, mainly serving agriculture, fishery, health care and food.

Real estate services firm JLL believes that numerous factors will drive an investment recovery in cold storage assets by 2030, where volumes have contracted from a 2021 high.

Specifically, investors will be drawn to the greater stability of the sector compared to other asset classes, supported by evergreen demand for perishable goods like food and medicine housed in cold storage facilities. Additionally, attractive leasing covenants, whereby rents are typically higher than standard logistics and industrial facilities and lease terms are longer, will attract forward-thinking investors.

More recently, the higher barriers to entry into cold storage have influenced activity in the sector but will draw more specialised investors and operators to the sector. According to JLL analysis, there is a growing acceptance that cold storage investment requires a deep understanding of the unique complexities associated with temperature-controlled environments, logistics, and regulatory compliance. As a result, this operational reality can act as a competitive advantage for knowledgeable investors, while creating a deterrent to other investors.

Additionally, for the sector to meet consumer demand for both efficiency and to address global disruptions, investment in technology is an increasingly important consideration for investors eyeing cold storage facilities. Advancements in automation, robotics, and energy efficiency can significantly enhance the operational efficiency of cold storage facilities and help reduce operator/occupier costs as technology improves.

Viet nam News