Cold storage: The new hot sector in real estate

Published July 26, 2021, 7:00 AM

by Bernie Cahiles-Magkilat

Cold storage is set to sustain its popularity among investment sectors in Philippine property market and is expected to grow by 10 percent this year as demand for vaccines, foods, and import goods will drive activity in cold chain logistics, according to a leading real estate services company and industry players.

Cold Chain Association of the Philippines President Anthony Dizon said during a webinar hosted by Santos Knight Frank, American Chamber of Commerce of the Philippines, and BDO Unibank, that the country’s cold storage industry’s capacity is set to grow by 10 percent in 2021.

According to Dizon, around 50,000 new pallets are to be commissioned this year that will add to the existing 500,000 pallets across the country. An additional 60 percent capacity will be in Luzon while 40 percent will be in Mindanao.

“The need for cold chain capacity should continue to grow as a function of population growth, economic recovery and consumption preferences, with special attention to the continuing development of e-commerce platforms,” said Dizon.

At least two agro-industrial business corridors have been identified by the government so far, namely the Taguig Agro Industrial Hub and the New Clark City Agro Industrial Hub, both of which will likely be important considerations for future cold storage expansion.

“Cold storage is one of the most resilient industries. Whatever happens in the economy, there will always be a need for food,” he said.

He, however, stressed that industry growth needs must be aligned with corresponding growth in production capacities, and capabilities around the country with emphasis on technology transfer/absorption, commercial farming and partnerships.

Likewise, he said that the industry will always need to be interpreted in conjunction with the needs and warrants of the sectors it invariably works with. As such, he noted that the cold storage industry would be of great help to bridge the dispute between livestock raisers and meat processors.

Meantime, Kash Salvador, head of investment & capital Markets of Santos Knight Frank stressed that the property landscape has experienced a tremendous shift since the pandemic, yet the industrial and logistics real estate sector, including cold storage, remains to be the most stable asset globally. In the Philippines, he said, more investors are looking to place significant capital into the industrial sector, including cold chain logistics.

“Now is the time to invest in logistics and explore because if you look at all the economic indicators, now is the time,”said Salvador.

To further unlock real estate opportunities for industrial and logistics, Salvador recommends property owners and landlords to explore converting their existing non-core assets near Metro Manila for industrial and logistics use.

“In Metro Manila, the former industrial areas have been converted into commercial properties, limiting the options for locators in the city. While there are opportunities outside Metro Manila, locators are balancing the costs between staying within the city and exploring provincial areas, considering aspects such as connectivity, infrastructure, and power. This presents property owners with a huge opportunity to cater to these occupiers.”

Overall, he said, the strong demand for industrial and logistics is key to recovery. “It not only helps the real estate sector but also increases the economic activity across the country,” he added.

Because of the pandemic, the industry has been experiencing a shift. “Investors now looking for cold chain assets and more stable asset,” he said. In the Philippines, he said investors are looking into logistics and cold storage.

Post pandemic, he said, the industry is expected to further grow. The growth will be supported by the strength of the Philippine demographics, and huge potential in ecommerce.

The growth of the cold storage industry goes hand-in-hand with the overall expansion of industrial and logistics real estate, according to Santos Knight Frank.