Preparing Sufficient Land Reserves for Logistics and E-Commerce

1 December, 2024

Vinh Loc 2 Industrial Park (Ben Luc District, Long An Province). (Photo: Hong Dat/VNA)

According to Mordor Intelligence, a market research and consulting firm, Vietnam’s transportation and logistics market is expected to reach US$48.6 billion by 2024, with a compound annual growth rate (CAGR) of 6.8%, reaching US$71.9 billion by 2030.

Similarly, according to the e-Conomy SEA 2024 report by Google, Temasek, and Bain & Company, Vietnam’s e-commerce market is estimated to reach US$22 billion this year, ranking third in Southeast Asia after Indonesia (US$65 billion) and Thailand (US$26 billion).

This represents an 18% growth compared to 2023, and Vietnam boasts the third fastest growth rate in the region, after the Philippines (23%) and Thailand (19%).

The Vietnamese market is expected to maintain this growth rate, averaging over 19% annually, and reach US$63 billion by 2030.

At that time, it is projected to overtake Thailand, ranking second in the region, only behind Indonesia, according to experts’ forecasts.

Currently, e-commerce accounts for over 60% of Vietnam’s digital economy in 2024, becoming one of the two main growth drivers, along with online tourism.

Experts from Savills Vietnam noted that the boom in e-commerce and logistics will require a large supply of ready-built warehouses and factories. Real estate serving e-commerce and logistics has ample room for development and growth in the coming years.

Savills’ recently published Vietnam Industrial Property Spotlight report for 2024 showed that the total supply of ready-built factories and warehouses across the country reached 15.1 million square meters, a 31% increase compared to the previous year, with strong new supply in key provinces.

In Southern Vietnam, the supply of ready-built factories and warehouses reached 10.6 million square meters, with factories accounting for 49% and warehouses making up 51%. The occupancy rate for these segments stood at 80%, with an average rental price of US$4.4 per square meter per month.

In Northern Vietnam, the supply of ready-built factories and warehouses reached 4.5 million square meters, accounting for 30% of the national supply, with a breakdown of 61% for factories and 39% for warehouses. The overall occupancy rate reached 80%, with an average rental price of US$5 per square meter per month.

John Campbell, Director of Industrial Services at Savills Vietnam, analyzed that this positive performance is also partly due to the strong demand for logistics space. The need for warehouse bases, distribution centers, and logistics hubs in Vietnam is rapidly increasing.

“In Vietnam, the logistics industry has significant growth potential and is one of the fastest-growing industries globally. The main driver is the steady growth of the economy, trade, high-value-added manufacturing, and the expanding middle class, which fuels the growth of e-commerce,” John Campbell explained.

To meet this significant demand, John Campbell emphasized the importance of focusing on land allocation for logistics and warehousing. According to the expert, the most crucial step any government can take to facilitate logistics is to invest heavily in infrastructure and ensure that projects are completed on time and without hiccups. Infrastructure is the backbone of logistics, encompassing everything from customs procedures to multimodal transportation, roads, and airports.

“Another critical factor is ensuring sufficient land allocation for logistics and e-commerce. Some industrial parks in Vietnam are designated solely for manufacturing, which can pose challenges for logistics and e-commerce companies seeking suitable land. To address this issue, it is essential to have industrial parks flexible enough to accommodate both manufacturing and logistics operations,” John Campbell stressed.

While investors can, in theory, apply for land-use conversion, this process can take several months and vary across different localities. However, such procedures can be a hindrance for investors who need to make quick decisions.

Many industrial parks were planned during the 2007-2008 period, mainly serving manufacturing activities. However, less attention was paid to logistics and e-commerce at that time. The rapid growth of these sectors has since highlighted the need for more diverse land use within industrial parks.

Therefore, John Campbell recommended that future development plans for new industrial parks should allocate sufficient areas for logistics and warehousing. Additionally, with the significant growth of e-commerce in Vietnam, providing suitable locations for distribution and transshipment centers is also necessary.

With a population of over 100 million, Vietnam boasts a large and promising online shopping market. More than 80% of the population uses the Internet for shopping, driving the expansion of e-commerce.

Illustrative image (Photo: VNA)

To cater to this growth, the demand for land to develop logistics facilities is increasing. Limited suitable land may lead to higher warehouse rental costs for businesses, impacting the market’s competitiveness.

The factors driving Vietnam’s logistics industry include GDP growth, manufacturing diversification, global supply chains, favorable trade conditions, and the booming e-commerce sector. The government’s policies, investment efforts, and infrastructure improvements also provide significant momentum.

Vietnam’s Logistics Performance Index also increased by 3.3 points in 2023 due to the development of the logistics industry and exports.

According to the Ministry of Industry and Trade, Vietnam’s e-commerce sector grew by 25% in 2023, becoming the fastest-growing market in Southeast Asia and one of the top ten fastest-growing markets globally.

More than 80% of domestic internet users reported engaging in online shopping, driving the expansion of e-commerce and attracting small and medium-sized enterprises (SMEs) to the field./.

Thu Hang