Great opportunity for real estate investors
The outbreak of the Covid-19 pandemic has significantly impacted on the global cold supply chain. Many cold supply chains launch new facilities abroad, as well as pay more attention to safe and adaptive ability.
Research & Markets report estimated that $7.9 billion was invested in developing cold storage globally last year and this figure will continue to hit $19 billion by 2027, due to increasing online grocery shopping as well as reducing food waste.
Environmental, social, and governance (ESG) standards are becoming more stringent, especially on the food supply chain in order to reduce food waste, which raises demand for cold storage. Cold supply chains which bring much higher yields, plus long-term leases, attract many investors.
Despite the current rapid rate of development, cold storage shortages are predicted to continue due to strong demand for fresh food. Specifically, 30-50% of Vietnam’s seafood export orders were canceled during the peak of the epidemic, leading to escalating inventories and maximum capacity cold storages run.
Cold storage development in Vietnam
Majority of the cold supply chain in Vietnam is currently operated by small and medium suppliers. Thus, being uncentralized. Therefore, this niche segment of the logistics industry is still a great potential for investors. Before the Covid-19 epidemic, the annual growth rate in the cold supply chain segment fluctuated at 11%-12%.
Cold storage has 3 primary types: deep frozen storage (from -30oC to -28oC), frozen storage (from -20oC to -16oC) and cool storage (from 2oC to 4oC) to store food, cosmetics, even vaccines.
According to market research company JLL Vietnam, cold storage for seafood will operate most effectively when located within a distance of 50 km to ports, and other items such as vegetables and fruits should be located near urban areas.
However, in fact, cold storage supply is mainly concentrated in the southern region, with up to 60% of the market share being held by foreign investors. The limited supply is partly due to the fact that cold storage is much more complex and costly to build than standard warehouses.
The cost of cold storage construction can take up to 6 months, which is also 2-3 times greater than that figure of a conventional warehouse. Besides, the lease time often ranges from 15 to 20 years, making the already supply even more and more scarce.