E-commerce trend to leverage logistics growth

The sudden increase of e-commerce adoption, particularly for food, fast-moving consumer goods, health and pharmaceutical products, is happening globally, especially in Asia Pacific, America and Europe. Vietnam has a young and tech savvy population to support the rise of ecommerce, which is expected to carry the industrial property industry through current uncertain time.

During the social-distancing period, almost every industries were affected. Mobility restriction had given e-commerce more customers, making the pandemic effect on it less severe than that of other industries like tourism or traditional commerce. Recent years have seen the birth of many new online models such as grocery or electronics shopping.

The sudden increase in demand is forcing producers of staple goods to scramble for additional warehouse capacity and companies to rethink supply chains. 

Trang Bui, Senior Director of Markets, JLL Vietnam comments: “This shift in customer behavior has increased both short- and long-term demand for the industrial real estate properties that allow companies to deliver orders faster by being closer to their customer base.”

The surges in demand for online goods during the pandemic highlights the need to rethink aspects of supply chain management. The skyrocketing order volume has forced e-commerce companies to keep more stock in locations near customers, fueling demand for flexible warehouses. JLL has been receiving requests from major e-commerce customers with the need to rent warehouses at 10 to 15 hectares, near the city center. This trend will prove beneficial in highly volatile events such as pandemics or peak seasons, Ms. Trang adds.

To mitigate the risk of disruption, many occupiers will seek to invest in distribution centers closer to parcel hubs and implementing port diversification strategies are ways to help ensure that there is minimal disruption the next time a major global catastrophe happens. Increasing transportation options, including inter-modal rail, so that that there is less reliance on trucks, and more automated facilities, also can reduce impact during major events.

JLL previously reported on a new flexible warehouse model with great potential to help businesses optimize their warehouses according to seasons. "AirBnB for logistics" is a shared economic model, allowing businesses to optimize storage space that is not in use. This model is designed for occupiers who only need to use storage space during a certain peak season, and they can make profit by leasing during the low seasons. For example, a company selling Christmas trees only needs space for the winter, so the warehouse will be empty during the summer months. Meanwhile, a pool accessories maker will need to use that empty space for summer stock.

“The exponential growth of e-commerce has driven demand for industrial real estate for the last 10 years, and the sudden spike in online activity since the crisis has accelerated that demand,” Ms Trang says. E-commerce in Vietnam still has a lot of potential and a long runway for growth, making industrial real estate the darling of the commercial real estate industry.

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