COVID-19 vaccines accelerate transformation in Asia Pacific’s cold storage sector

The development of COVD-19 vaccines and wider uses of temperature controlled drugs could see more demand of cold storage industrial properties.

May 11, 2021

The COVID-19 pandemic has accelerated many trends in our society and economy. Global supply chain management is one industry that is under transformation, with long-lasting implication for the provision of logistic real estate.

One of the most significant influences of COVID-19 on supply chain management will be the cold chain logistics - the infrastructure and process required to maintaining specific temperature bands under which perishables can be stored and transported. Demand for cold-storage warehousing has been rising globally due to the surge in online grocery shopping. The pandemic has accelerated this trend as consumers place increased emphasis on ready-made meal and online grocery ordering.

Cold-storage uses also include pharmaceutical products and the sector is critical in getting COVID-19 vaccines that are rolling out this year. Due to variations in the storage temperature requirements of the different pandemic vaccines, governments and the private sector are mobilizing available cold chain capacity. Vaccines with an ultra-low storage temperatures (e.g. -70 °C +/-10 °C) pose severe challenges for many emerging countries. For example, the Pfizer-BioNTech COVID-19 vaccine represents a logistical challenge as shippers must keep it at an exceptionally cold minus-70 degrees Celsius.

Moreover, this vaccine is likely the first of what is expected to be many pandemic vaccines that have ultra-low temperature cold chain requirements. Because Initial batches of COVID-19 vaccines may be scarce, the World Health Organisation has issued guidance on cold chain and supply strategies to ensure that vaccines are deployed to the target populations efficiently. These mechanisms such as storage, repackaging, transportation and tracking of products should become standard protocols for many countries that receive COVID-19 vaccine even after the pandemic.

Compared with other products in the cold chain market, pharmaceutical products are generally high value-added commodities and with a short shelf life. With strong projected growth in medicine sales and wider uses of temperature-controlled medicines that require complex supply chains, the Asia Pacific region should see strong demand for cold storage industrial properties over the short to medium term.

As with other types of logistics infrastructure, the region has significant shortages of modern cold-storage assets. Historically, cold storage capacity in Asia Pacific has been limited due to the cost and complexity of construction. The total capacity of refrigerated warehouses worldwide was 719 million cubic meters in 2020, according to the Global Cold Chain Alliance (GCCA). The US, at 156 million cubic meters, was the single largest country market, followed by India at 150 million cubic meters and China at 131 million cubic meters. Recent increases in capacity was largely from North America and China.

Cold chain storage remains undersupplied in developing Asia on a per capita basis. According to GCCA, cold storage space in China and India average just 0.1 cubic meter per person in 2020, ranking behind most leading cold storage markets worldwide. In comparison, US lead on a per capita basis with 0.5 cubic meter.

As such, there is huge potential for operators to build new capacity in the region and develop new facilities such as fully automated cold storage warehouses. At the same time, this growing sector will create opportunities for investors to create partnerships with experienced operators. There is also large potential to convert existing warehouses into cold storage facilities or to upgrade older cold storages by adopting cost-effective technologies.

Figure 1: Cubic meter per person in the world’s top ten cold storage markets

Source: Global Cold Chain Alliance, Statista, Oxford Economics, 2021
Note: Capacity for US, China and India as of 2020, 2018 for the rest.