Before the advent of the COVID-19 pandemic, the Philippines’ logistics and warehousing market was thriving. The logistics industry was forecasted to grow at a rate of 8.2% to 8.8% for the period 2018 – 2024 and was projected to be a Php 970 billion to Php 1 trillion market by 2023. The Philippine government’s efforts to simplify transactions through the Ease of Doing Business Law and its actions to improve the quality of infrastructure via the “Build-Build-Build” program have enabled the Philippines to significantly advance its status in the World Logistics Performance Index (LPI) rankings.
While the COVID-19 pandemic has, unfortunately, hindered the rapid rise of the country’s logistics and warehousing market, the industry however, has remained steadfast. In fact, the Philippine logistics and warehousing market’s role as a service provider has become recognized as a vital and indispensable function considering that the COVID-19 pandemic has necessitated the implementation of new economic and social protocols.
Manufacturing Slowdown Impacts on Logistics and Warehousing
According to the Lobien Realty Group (LRG), one of the fastest rising real estate consultancy firms in the Philippines, the COVID-19 pandemic’s severe effects on some industries has consequently affected the logistics and warehousing industry. The government’s strict implementation of quarantine measures has caused a serious impact on the manufacturing industry. Merchandise exports declined by 35.6% but with notable improvements in agro- based, forest and manufactured products. Imports fell by 40.6% but showed slower contractions in major commodity groupings, particularly capital goods, raw materials including chemicals and manufactured goods, and consumer goods. The pandemic has caused a limited movement of goods nationwide. Although some manufacturers continue to produce and distribute non-essential items like clothes, bags, accessories, shoes, etc., it is evident that the manufacturing sector is more focused on the production and distribution of food and essential goods. Manufacturing firms have had to reduce the cost production as a response to the decrease in purchase of their customers.
E-Commerce Pumps Life to Logistics and Warehousing
The E-Commerce industry on the other hand has grown steadily for the past few years and the pandemic has only strengthened the market. Retailers and business owners are left with no option but to strategically transition their market online to sustain their operations as physical stores were forced to shut down or to limit their transactions via take-out and delivery services in compliance with quarantine regulations. As people practice social distancing and continue to work from home, they prefer buying from online shopping sites to avoid being exposed to a lot of people. This has resulted to the rise of E-Commerce companies and a sales slump on brick-and-mortar stores which has consequently intensified the logistics industry. Innovations and initiatives in E-Commerce logistics to cater to the enormous logistics demand as well as helping displaced people earn a living are becoming more common and welcome participants in the logistics market.
The measures taken by both the public and private sector to mitigate supply chain disruption during the pandemic combined with the strong demand in E-Commerce logistics has, in turn, caused an increased need for warehousing. LRG recommends that with the robust demand in warehousing, the warehousing industry should apply technological innovations that will provide more value-added services and profitability for their clients. LRG expects automation and robotics to be commonplace in the warehousing industry in the near future.
Warehouse Lease Rates in Metro Manila and its Outskirts
The limited supply of land in Metro Manila has influenced the continuous increase in land values. Due to this reason in addition to construction cost, the revenue aims of traditional warehouse business models in Metro Manila have been highly affected. Warehouse lease rates in Metro Manila are currently high with Makati and Taguig’s rates going for Php 400 to Php 1,000 per sqm.; Pasig and Mandaluyong’s rates from Php 200 to Php 1,000 per sqm; Quezon City, at Php 150 to Php 500 per sqm; Alabang, from Php 250 to Php 400 per sqm; Bay City – Php 200 to Php 450 per sqm; and, Paranaque – Php 200 to Php 500 per sqm.
However, the construction of a warehousing facility used purely for storage within Metro Manila is seen to result in a longer payback period. For this reason, developers may seek warehouse locations in provincial areas that have more flexible land and reasonable land values. Bulacan, Cavite and Batangas’ lease rates currently go for Php 150 to Php 300 per sqm; Laguna, from Php 150 to Php 250 per sqm; Bataan, from Php 150 to Php 200 per sqm; and Pampanga from Php 90 to Php 200 per sqm.
Government and Private Sectors’ Role in Growth of Logistics and Warehousing
LRG expects that the logistics and warehousing industry in the Philippines will continue to grow despite the COVID-19 pandemic. To support this projection, LRG says that top property firms have invested in and are currently engaging in logistics and industrial developments. Ayala Land Logistics Holdings Corp. and Ayala Corp. Infrastructure Holdings, Inc. operates several real estate logistics and industrial parks in key regions of the country, has acquired the Laguna Technopark in 2018 and has invested in Zalora Philippines and Entrego to capture the growing opportunities in E-Commerce. SM Investments Corporation acquired a minority stake in the country’s largest integrated supply chain operator 2GO Group Inc., whose businesses include shipping, freight forwarding, warehousing and express delivery services. Filinvest Land, Inc. has integrated industrial and technology parks in several projects across the country, like Filinvest Technology Park in Ciudad de Calamba and has started developing New Clark City, a future-ready and environmentally-friendly mixed-use township which will have an allotted 100 hectares for its industrial zone.
For the logistics and warehousing industry to continue moving forward in a way that befits its important role, LRG notes that the government should support logistics organizations in project implementation by coordinating the logistics response, logistics operations, and proposing solutions. LRG also proposes that logistics partners focus on two response areas; the quantity and type of logistics support that could be provided to the government, and the technical and operational assistance in the private sector response planning which includes business continuity planning. As the growth of the E-Commerce industry is anticipated to rise continually for the next couple of years, LRG concludes that the logistics and warehousing industry will achieve the original pre-COVID mid-term growth rate forecasted by industry experts.
Read more: https://business.inquirer.net/306460/philippine-logistics-and-warehousing-market-holds-steady-amidst-covid-19#ixzz6WwupAqEp