Logistics in a post-pandemic era - MIDA | Malaysian Investment Development Authority
contrastBtngrayscaleBtn oku-icon


plusBtn crossBtn minusBtn


This site
is mobile


Logistics in a post-pandemic era

Logistics in a post-pandemic era

14 Aug 2021

How Covid-19 will shape the future of the industry

Up until a year-and-a-half ago, the logistics and warehousing space was often considered an afterthought when it came to property investment.

For property investors, it was always sub-sectors like the residential, commercial and retail that’s constantly on the radar.

To say that the Covid-19 pandemic has shaken things up would be a huge understatement.

As people around the world were forced to stay at home to “flatten the infection curve,” the surge in e-commerce and demand for additional warehouse space has seemingly breathed life into the “less-than-exciting” logistics sub-sector.

“The once dull, not-quite-sexy logistics sub-sector has now come under the radar for plenty of investors,” says an industry observer.

As property investors remain cautious on the outlook of the market, the once popular sub-sectors like residential and commercial have become somewhat less red-hot, at least for the near term.

The question is, once we head into post-pandemic territory, will the logistics industry lose its shine?

One industry observer says the pandemic has highlighted how important and resilient the logistics sector really is.

“It’s arguably one of the best performing sectors right now and investors will come to realise that it’s not only pandemic-proof, but is also a safe investment option.”

One fund manager says the logistics sector will still be an important sector post pandemic, but may not be as popular with investors.

“Once the dust has settled, when countries have vaccinated a majority of their population and the economy is up and running again, I do see investors placing their money in the residential and commercial space. That won’t change.

“The pandemic has highlighted the importance of the logistics industry and activity in this area will no doubt pick up further, going forward. But it will not replace other property sectors in terms of investment preference,” he says.

Knight Frank Malaysia research and consultancy executive director Judy Ong believes that the logistics space will continue to be sustained by rising demand.

“As Malaysia grapples with the alarming spike of Covid-19 infections, its growth momentum, which is initially expected to continue into the second half of this year and beyond, will be derailed. The strict containment measures currently in place continue to severely disrupt supply chains.”

She adds that the Covid-19 crisis, however, has a silver lining for the logistics industry.

“With prolonged periods of lockdowns and restrictive movements, there is a structural shift towards omnichannel retailing. The pandemic-driven e-commerce boom augurs well for the industrial property market due to growing

“Penang, ranked third in the country with a total manufacturing investment of Rm14.1bil in 2020, garnered Rm1.08bil worth of approved manufacturing investments from 40 projects in the first quarter of 2021.” Mark Saw

warehouse space requirements to cater to the surge in last-mile delivery and collection.

“Moving forward, there is sustained interest in the logistics industry supported by strong demand for warehouse and distribution facilities.”

Knight Frank Malaysia’s Penang branch executive director, Mark Saw, says the growth in manufacturing investments within the state over the years will continue to spur interest in the logistics industry.

“Penang, ranked third in the country with a total manufacturing investment of Rm14.1bil in 2020, garnered Rm1.08bil worth of approved manufacturing investments from 40 projects in the first quarter of 2021.

“The industrial sector continues to remain as the state’s economic anchor in promoting hightech industries, such as electronics and electrical (E&E), machinery and equipment and medical technology.”

Saw adds that the Penang state government aims to promote its global business services and will continue expanding its industrial land bank following the encouraging take-up at the Batu Kawan Industrial Park.

“Penang’s medical and logistics industries are seen to be up and coming and once the pandemic is brought under some semblance of control, there should be more investment activities returning to Penang.”

Meanwhile, Knight Frank Malaysia’s Johor branch director, Debbie Choy, says a shift in the need for larger storage and efficient logistic services are seen in the Johor market.

“This increases the demand for industrial properties where some may consider shifting to smaller shop fronts or moving towards the digital platforms. Manufacturers that will benefit from the surge of demand for their goods during this time are also actively in search of appropriate sites for their expansion.”

Separately, Knight Frank Malaysia industrial capital markets executive director Allan Sim says growth in the logistics sector will be supported by more new requirements and space expansion from e-commerce players, as well as last-mile logistics service providers.

“The accelerated shift from traditional retail to online order fulfillment will continue to generate strong demand to propel sustainable growth into the future.”

In the manufacturing space, he says there will be more interests surfacing in the E&E sector, driven by the global shortage of semiconductors as well as the 5G network roll-out.

“The E&E sector is one of the top performers amongst key indices, such as manufacturing output, export and manufacturing sales.”

Meanwhile, an analyst that covers listed logistics companies says firms will need to gear up for growth within the sector by acquiring future talents.

“We believe the rise in demand for logistics services will continue post-pandemic and companies will need to be ready for a potential talent tussle, or risk losing out to the competition.”

Aminvestment Bank in a recent research report maintained its overweight recommendation for the transportation and logistics sector.

“We believe seaport operators will continue to benefit from the growing containerised cargo movements worldwide, while the parcel delivery segment will continue to ride on the exponential volume growth as the pandemic has permanently shifted part of consumers’ shopping to online. On the other hand, while lagging at present, we believe the recovery in the air travel industry shall gradually take hold as international borders reopen with more economies in the world reaching herd immunity on the back of robust vaccine rollouts.”

According to Trailer Bridge Inc president and chief executive officer Mitch Luciano, who was quoted in a Forbes article earlier this year, the pandemic has challenged transportation professionals to quickly adapt to a dramatically altered logistics landscape.

“The pandemic has disrupted supply chains, imposed remote work on all but essential workers and completely upended executive priorities. Companies that have transformed themselves are weathering the storm and while some changes are temporary, many are here to stay.”

Trailer Bridge is a Us-based freight service company.

Luciano notes that digital disruption has practically exploded.

“As countries worldwide put safety protocols in place in 2020, many savvy organisations quickly pivoted to e-commerce and digital transformation. Most executives plan to continue making their companies increasingly digital and virtual, especially if they lead large organisations.”

Moving forward, he says digital strategies will need to encompass core business operations and processes, such as serving customers and storing inventory.

“The pandemic also showed the manufacturing and logistics industries the dangers of just-in-time, one-source supply chain management. Many operations will need to rethink lean manufacturing practices,” he says.

Source: The Star