Vietnam Cold Storage Rental Surges

The logistics sector plays a large and critical role in the global economy. Cold storage is a niche segment that offers specialized products of foodstuffs and medications varying temperature requirements. Cold storage facilities require more time to build than other types of logistics facilities and are more expensive than standard warehouses.

The lease term is usually 15-20 years, making the scarce supply even scarcer. As a result, cold storage development cannot keep pace with the sudden increase in demand, especially during the peak of Covid-19:

• 30 - 50 percent of seafood export orders were canceled, leading to an increase in inventories, forcing cold storage to work at maximum capacity. 
• People turned online in the face of lockdown restrictions, thus, accelerating digital and e-commerce. 
• Pharmaceuticals and chemicals industries need cold storage more than ever as COVID-19 vaccines require low temperature for preservation. 

As demand exceeds supply, cold storage rental prices have surged. In northern Vietnam, cold storage rental prices vary depending on location. In Hanoi, when rental prices increase 30 percent in central Hanoi, they increase roughly 40 – 50 percent in suburban Hanoi.   

Although 60 percent of cold storage is in southern Vietnam, it is still overloaded with the increasing demand for food and essential goods of more than 9,4 million people in Ho Chi Minh City. As a result, in the past 2 years, cold storage rental is nearly doubled its price, from $52/ton in the first quarter of 2020 to $87/ton in the fourth quarter of 2021. 

Managing cold storage in Vietnam
In the next couple of months, consumer shopping demand will be especially high as of Lunar New Year. An illustration of this is Ho Chi Minh City (HCMC): cold storage in the city can only store 60,000 tons of foodstuff which can only provide food for its people in a week. Many businesses have proposed to the HCMC People’s Committee to develop cold storage for better food supply chain systems. For an immediate solution, businesses are focusing on speeding up production and activating goods supply options.

The demand for Cold Chain Storage is even more urgent as in the next 10 years, with a vision to 2050, Vietnam plans to conduct major infrastructure development on Seaports (Master plan in Vietnamese) and Airports (Master plan in Vietnamese). 

Vietnam seaports are expected to deal with annual goods throughput growth of 4.42 – 5.04 percent (Table 1). Thus, the Government of Vietnam (GVN) aims to significantly upgrade, expand, and transform several seaports across Vietnam, from Hai Phong, Thanh Hoa (Northern region), along with Da Nang, Khanh Hoa (Central region), to Ba Ria-Vung Tau and Soc Trang (Southern region).

In November 2021, the Vietnam Ministry of Transportation (MOT) published its tentative airport development plan. In which, the development of International Airports in Hanoi (Nội Bài) and Ho Chi Minh city (Tân Sơn Nhất and Long Thành) will be prioritized along with the establishment of airports in remoted areas. These developments involve logistic centers establishment. 

It is predicted that the Vietnam cold chain market will reach $295 million in 2025 and will grow at an annual rate of 12 percent. This growth opens many opportunities to attract investment into niche real estate markets. The need to purchase and import qualified cold storage machinery and equipment will be generated, thus, create export opportunities for U.S. companies to penetrate Vietnam’s market.

For more information, please contact Ngan Thai – Commercial Assistant (Hanoi) at ngan.thai@trade.gov or Thao Nguyen – Commercial Specialist (Ho Chi Minh City) at thao.nguyen@trade.gov.

Table 1 - Target growth over the next 10 years, with a vision to 2050

Source: Decision No. 1579 /QĐ-TTg of Vietnam Prime Minister on the master plan for the development of Vietnam’s seaport system from 2021 to 2030, with a vision to 2050 (effective date: September 22, 2021).