by position.vn 
Charting the Path to Recovery in the Vietnamese Real Estate Sector and Seizing Opportunities for Real Estate Businesses
Balancing Demand and Supply in the Thriving Cold Storage Sector
In the ever-evolving landscape of Vietnam’s real estate market, one particular segment has been catching the eye of investors: the cold storage real estate market. As of now, the average cold storage rent in Vietnam has reached a noteworthy $22 USD/ton/month. This market is swiftly becoming recognized as a land of potential, especially for real estate investors looking to tap into the booming cold storage industry.
A Glimpse into the Market’s Upward Trajectory
Savills’ Asia-Pacific Cold Storage Real Estate report, unveiled in June 2023, unveiled a remarkable 29.6% growth rate in the cold storage market from 2017 to 2022, despite comprising only 11.4% of total industrial real estate transactions. This substantial growth far surpasses other property segments within the market.
The surge in demand for cold storage solutions is rooted in several factors, including increased household incomes, urbanization, the burgeoning middle-class population, and shifts in consumer behavior.
Driving Forces and Market Dynamics
Within the Vietnamese context, the robust domestic demand, coupled with the explosive rise of e-commerce, has been the driving force behind the cold storage market’s rapid expansion. The Vietnamese e-commerce sector has experienced an impressive growth rate of 21.5% from 2017 to 2022, fueling the growth of auxiliary services. The surge in online food delivery services has also contributed significantly, with a growth rate of 5.5% from 2020 to 2022.
Evaluating the Landscape and Investment Prospects
Experts in the field highlight that Vietnam’s cold storage market remains in a developmental phase, boasting a relatively modest scale with over 40 projects and a total cold storage area of approximately 460,000 m² as of 2022. Meanwhile, the market’s demand remains considerably untapped, offering substantial potential for investors.
Adding to the appeal, the current supply of cold storage in Vietnam is relatively limited, predominantly concentrated in major cities. In the southern region, particularly Ho Chi Minh City and neighboring provinces such as Binh Duong, Long An, and Dong Nai, an expansive market demand for food, seafood, and retail products fuels dynamic growth, accounting for 87% of the nation’s total supply.
In the northern market, while there has been considerable growth in supply in cities like Hanoi, Bac Ninh, and Hung Yen, it still lags behind the vibrant southern market.
Navigating Rental Rates and Investment Avenues
Notably, cold storage rental prices vary considerably across different markets. Ho Chi Minh City commands a significantly higher rental fee, nearly twice that of other regions, attributed to superior facilities and a range of value-added services.
Mr. Thomas Rooney, Senior Manager of Industrial Services at Savills Hanoi, explains, “Average cold storage rental prices in the Vietnamese market range from $22 USD/ton/month (in Bac Ninh) to as high as $50 USD/ton/month in Ho Chi Minh City. The influx of new cold storage supply primarily stems from domestic enterprises.”
Gauging the Way Forward and Overcoming Challenges
While the prospects are promising, the industrial and logistics real estate sector faces its share of challenges. Improvements in infrastructure and suitable technology are imperative for the transportation and storage services within the cold supply chain. Additionally, the intricate operational nature of cold storage necessitates higher investments and operating costs compared to conventional models, leading to longer return periods.
Moreover, the stringent safety and health regulations for cold storage due to the perishable nature of stored goods contribute to complex licensing processes, particularly for newcomers. As a result, most cold storage investors tend to be experienced players with robust financial capabilities.
Carving a Path to Prosperity
In recent times, numerous enterprises have recognized the market’s potential and invested significantly in cold storage projects. Companies like Cold Storage Logistic Hau Giang have embarked on groundbreaking projects within larger external rental cold storage centers, employing cutting-edge technology and modern management practices. Similarly, ABA Cooltrans invests not only in major cold distribution centers across key cities but also boasts an extensive fleet of refrigerated vehicles.
As experts predict further growth in the cold storage industry, the sector’s journey towards development involves a twofold strategy: enhancing supply chain services and navigating complex operational landscapes. As e-commerce continues its ascent and consumer preferences evolve, the cold storage real estate market presents a promising avenue for seasoned investors and newcomers alike.
Discover Our Cold Storage Portfolio
If you’re interested in exploring investment opportunities in Vietnam’s thriving cold storage real estate market, consider our portfolio at Position Asset. Our expertise and strategic insights can help you make informed investment decisions that align with your goals. Contact us today to learn more about the potential this dynamic market holds.
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