Rapid e-commerce growth to drive Singapore’s logistics services sector: Colliers report

The rapid growth in e-commerce demand for retail purchases represents an opportunity for the logistics services market to grow further in Singapore, said Colliers International in a report.

The Glimpsing the Road Ahead: Reshaping the Logistics Market report, citing a study by the payments technology company WorldPay, said the e-commerce market in Singapore is tipped to expand 48 per cent to US$7.4 billion by 2022 at a compound annual growth rate of 7 per cent.

Singapore is ranked seventh globally, and second in Asia – behind Japan – in the World Bank’s 2018 Logistics Performance Index, and 12th in 2018 in the world’s busiest airports by cargo traffic, ahead of well-known international cities such as Los Angeles, Beijing, London and Chicago.

Demand for warehouse space in Singapore was firm in Q1 2019, with net absorption of 506,000 square feet and a vacancy rate of 10.8 per cent versus 11.1 per cent in Q1 2018, said the real estate services and investment management company.

The average gross rents for the logistics sector remained unchanged year on year at S$13.50 per square metre per month in Q1 2019.

With the warehouse vacancy rate remaining high after the quarter-on-quarter increase to 10.8 per cent in Q1, Colliers said it expects logistics rents in the island nation to remain soft for the rest of 2019.

The limited buying opportunities should lead to modest yield compression for logistics and warehouse assets, it added.

Overall, Colliers said technologies and new business models are reshaping the Asian logistics sector.

The logistics sector is under pressure to deliver a better-quality service at an ever lower cost, and technology is being used to bridge the gap.

“Many instances of how AI (artificial intelligence) is improving logistics are already in place. Other technology innovations including cloud solutions, supply chain financing, blockchain and automated solutions in the warehouse have also been deployed in the logistics sector to enhance productivity and minimise risk of processing errors,” said Colliers.

Commenting on new business models, Stephanie Sun, director of research, Asia at Colliers, said the logistics business is largely driven and shaped by e-commerce which involves various categories of providers and services.

In recent years, disruptive businesses such as Amazon and JD.com have business models that simplify operations and eliminate significant labour costs associated with the traditional logistics industry, Ms Sun added.

In its report, Colliers picked out four key market trends to expect in the near future: on-demand warehousing, automation as a service, co-working spaces in the logistics sector, and utilising technology to modernise customs systems and processes.

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