Ngoc Tran, BW Deputy Director – Key Account and Host Nhi A.N at BW Expert Talk Series Eps 4
[5 min read]
Built-to-suit warehouses offer cost-efficient and innovative solutions to help improve operations, and many businesses are turning to using them. As e-commerce demand continues to grow, the rapidly growing built-to-suit warehouse provides an alternative for businesses that need warehouse space. But what is a built-to-suit warehouse and why is it becoming so popular among e-commerce platforms and last-mile delivery companies? This short Q&A with Ms. Minh Ngoc, Deputy Director of Key Account at BW, will share key knowledge about built-to-suit warehouses.
What is the Built-to-suit warehouse?
The built-to-suit warehouse is a commercial building constructed by the landlord based on the client’s special specifications. Not only will the developer acquire the land, but they also sit down with the tenant to review and agree upon all design and construction elements. Then, the landlord constructs the building and hands it over to the client as per their detailed requirements.
Is the demand for built-to-suit warehouses mostly driven by e-commerce related tenants?
On a global scale, Vietnam’s retail e-commerce revenue reached 5.545 billion USD in 2022, up about 12.7%, according to the Vietnam E-commerce White Paper 2022. This number is forecasted to reach 7.385 billion USD by 2025. The value of online shopping for the first time reached 260 – 285 USD per person. Vietnam’s B2C retail e-commerce revenue in 2022 is at 16.4 billion USD, marking the first year to reach this landmark, reported the Vietnam E-Commerce White Book 2022.
In addition, Vietnam’s e-commerce maintained a stable growth rate at 16%, ranking second in terms of e-commerce growth in Southeast Asia, after Singapore. As a result, we realize there is a rapidly increasing demand for built-to-suit warehouses, which have been driven by e-commerce related tenants because of the economic recovery after the COVID-19 pandemic. In recent years, BW has received many inquiries for built-to-suit facilities from e-commerce tenants, who spend a large portion of their investment on the optimization of logistic operations. This can minimize delivery cost, speed up delivery times, and help players to gain the market share in the competition.
Therefore, the warehouse location and the warehouse design must meet their expectations in order for them to process hundreds of thousands to millions of parcels per day. And few existing facilities in the current market are suitable for these types of demand. We at BW understand that, in Vietnam, manufacturing fields depend on various industries. There are different requirements of infrastructure, offices, facilities, and logistics warehouses. Thus, we provide customized warehouses for rent to suit investors of various business models, timing and costs. The process from design to handover of specifically designed warehouses involves considered planning, carefully chosen materials, and high-quality construction to ensure the perfect balance between function and design. In particular, Shopee Tan Phu Trung Fulfillment Center is one of our most successful projects. Located at road No. 13, Tan Phu Trung Industrial Park, Tram Bom Hamlet, Tan Phu Trung Ward, Cu Chi District, this single-storey fulfillment center features for S-Trading for Shopee to meet rising needs of customers in the highly shopping seasons:
BW Industrial is so proud to be a developer with speedy land acquisition and a responsive and seasoned in-house construction team that manages the delivery of client requirements while assuring market practice and standard.
BW Built-to-suit project – Shopee
What are the challenges that developers may face when developing built-to-suit warehouses?
It’s all a matter of risk. Not only in e-commerce, but other businesses as well. If a client requests for a built-to-suit project, it means that the facility has to contain the special specifications which serve only these individual users. In most of the cases, those kinds of specifications make it difficult to lease the warehouse once the tenant leaves. Therefore, in the worst-case scenario, like early termination, we can minimize the risks in the contract terms. However, for this type of product, the developer needs a lot of experience and resources to deal with related risks.
Timing in built-to-suit warehouse projects?
It depends on many variables; for example, the project scale, the land status, design, etc. One of the key things to consider is the pre-construction licensing period. For the construction timeline, developers like BW can control the design, construction period, land acquisition process, or legal DD. However, with licensing, it is not fully in our hands to control the timeline. We have an estimated timeline for the process, but it varies depending on the project scale. If the project classifies as Grade 1, the project must seek the approval from the central government, which may take a longer time.
What is the best possible workflow to balance between tenant demand and maintaining a sustainable portfolio for the company?
BW always focuses on building the cold-shell of the project, which emphasizes our core business and helps us to execute the project efficiently. After many years of experience, we have established the standard workflow so that the leasing, financial, business development, legal, and construction departments can have an open discussion to understand each other. We also have to maintain the conversation with the external stakeholders, such as the general contractor or the local authority, to make sure we can deliver the project on time.
In conclusion, many companies are turning to BTS solutions because they are helpful amid the increase of e-commerce and the reliance on the supply chain. BTS warehouses allow tenants to rely on the expertise of the developer while focusing on conducting their core business efficiently.