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Logistics market steady amid Covid-19

 

THE Philippine logistics and warehousing industry remained steadfast amid the coronavirus disease 2019 (Covid-19) pandemic, according to Lobien Realty Group (LRG), one of the fastest rising real estate consultancy firms in the country.

Before the pandemic, the industry was thriving. The 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 country to significantly advance its status in the World Logistics Performance Index rankings.

The onset of the pandemic and the ensuing community quarantine measures implemented to stop the spread of Covid-19 has only slowed down its rise.

 

Despite the pandemic, the local logistics and warehousing industry’s role as a service provider has become recognized as an indispensable function in what is now the “new normal” with new protocols implemented.

Manufacturing slowdown impacts on logistics and warehousing

The pandemic’s adverse effects on some industries has consequently affected the logistics and warehousing industry as it limited the movement of goods nationwide. The quarantine measures affected the manufacturing sector, in particular, as it focused on the production and distribution of essential goods. Manufacturing firms were forced to reduce production costs in response to the decrease in purchases.

E-Commerce pumps life

The pandemic has seen the e-commerce industry flourish. Retailers and business owners are compelled to transition their market online to sustain their operations as physical stores were forced to close or to limit their transactions through take-out and delivery services in keeping with quarantine regulations of social distancing and staying at home.

People have come to accept online shopping as the new norm as health and safety protocols force them to stay at home. As a result, e-commerce companies are on the rise, which has consequently intensified the logistics industry. Innovations and initiatives in e-commerce logistics to cater to the enormous logistics demand are becoming more common.

The measures taken to mitigate supply chain disruption, combined with the strong demand in e-commerce logistics, has caused an increased need for warehousing. LRG recommends that the warehousing industry apply technological innovations that will provide more value-added services and profitability for their clients. It is highly likely that automation will 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 target revenues of traditional warehouse business models in Metro Manila have been greatly affected.

Warehouse lease rates in Metro Manila are currently high with Makati and Taguig’s rates going for P400 to P1,000 per square meters (sqm).; Pasig and Mandaluyong’s rates from P200 to P1,000 per sqm; Quezon City, at P150 to P500 per sqm; Alabang (Muntinlupa), from P250 to P400 per sqm; Bay City — P200 to P450 per sqm; and, Parañaque — P200 to P500 per sqm.

This has prompted developers to seek warehouse locations in the provinces that have more flexible land and reasonable land values. Bulacan, Cavite and Batangas’ lease rates currently go for P150 to P300 per sqm; Laguna, from P150 to P250 per sqm; Bataan, from P150 to P200 per sqm; and Pampanga from P90 to P200 per sqm.

Government and private sectors’ role

LRG sees the logistics and warehousing industry in the Philippines to continue thriving amid the Covid-19 pandemic. To support this projection, top property firms like Ayala Corp., SM Investments Corp. and Filinvest Land Inc. have invested in and are currently engaging in logistics and industrial developments.

To ensure the industry will continue moving forward, the real estate consultancy firm pointed out that the government should support logistics organizations in project implementation by coordinating the logistics response, logistics operations, and proposing solutions.

In addition, logistics partners should 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 expected to continue rising for the next couple of years, LRG concludes that the logistics and warehousing industry will attain the pre-pandemic mid-term growth rate forecasted by industry experts.

 

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