The changing face of our logistics facilities is a nod to our increased emphasis on supply chain sustainability.
Written by the PRIME Philippines Research and Advisory Team
As the industrial sector in the Philippines continues its upward trajectory, logistics and distribution centers are undergoing significant transformations. These shifts are being driven by key trends such as the rise of multi-facility warehouses, the centralization of logistics operations, and a heightened focus on sustainability.
These developments are not only shaping the future of the industrial market but are also enabling companies to optimize their supply chains, meet evolving customer demands, and align with global sustainability objectives.
In the first half of 2024, warehouse demand was predominantly driven by logistics companies (53%), followed by manufacturers (21%) and wholesalers and retailers (15%). While the composition of the top demand contributors has remained consistent, there has been notable interest from telecommunications companies, particularly in Bulacan and Pampanga. Despite these emerging demands, the logistics, manufacturing, and retail sectors are expected to remain the dominant forces in the warehousing market, albeit with potential shifts in their rankings.
Among these sectors, the manufacturing industry has experienced a significant 136% year-on-year surge in demand, particularly from companies in the food and electrical equipment sectors.
Geographically, Davao del Sur led the country in warehouse demand during the first half of the year, accounting for 23.5% of the total, followed by Bulacan (20.0%), Cebu (8.6%), and Metro Manila (7.8%). Davao del Sur also topped the demand mix in the same period in 2023, with similar industry dynamics.
The multi-facility warehouse
In recent years, there has been a noticeable trend toward the development of multi-facility warehouses within the logistics and distribution sectors. These facilities are often part of larger, strategically located industrial parks that cater to the diverse needs of logistics companies and their clients. The appeal of multi-facility warehouses lies in their ability to offer scalable, flexible solutions that can accommodate the varying requirements of different businesses.
One of the key drivers behind this trend is the increasing demand for build-to-suit (BTS) solutions. Build-to-suit warehouses are custom-designed to meet the specific needs of a tenant, offering a tailored approach that maximizes operational efficiency. For logistics companies, this means having the ability to design spaces that support their unique workflows, technology integrations, and storage requirements. As supply chains become more complex and customer expectations continue to rise, the ability to create bespoke facilities becomes a critical competitive advantage.
The build-to-suit model is particularly attractive in the Philippines, where land availability and infrastructure vary significantly across regions. By investing in BTS facilities, companies can ensure that their logistics operations are optimized for the specific challenges and opportunities presented by different locations. This approach not only enhances operational efficiency but also allows companies to future-proof their investments by designing facilities that can adapt to changing market conditions and technological advancements.
Centralized operations
Another significant trend in the industrial market is the centralization of logistics operations. As companies look to streamline their supply chains and reduce operational costs, there is a growing preference for central hubs that can serve multiple regions.
Centralized logistics centers enable companies to consolidate their operations, reducing the need for multiple smaller warehouses spread across various locations. This centralization leads to improved inventory management, faster distribution times, and lower transportation costs.
For example, logistics companies serving Metro Manila, North Luzon, and the Cavite area are increasingly seeking centralized hubs for each operation by region that allow them to manage their operations more effectively. These hubs are designed to handle large volumes of goods, with state-of-the-art facilities that support efficient loading, unloading, and storage processes. By centralizing their logistics operations, companies can achieve greater economies of scale, improving their overall profitability and competitiveness.
Sustainability as the core
Sustainability has become a central concern for companies across all sectors, and logistics is no exception. As part of their broader environmental, social, and governance (ESG) strategies, logistics companies are increasingly looking for ways to reduce their carbon footprint and operate more sustainably.
This has led to the adoption of green building practices in the design and construction of warehouses, as well as the implementation of energy-efficient technologies and renewable energy sources.
For instance, modern warehouses are now being equipped with solar panels, energy-efficient lighting, and advanced climate control systems that minimize energy consumption. Additionally, sustainable materials and construction methods are being used to reduce the environmental impact of building new facilities. These efforts not only help companies meet regulatory requirements and customer expectations but also result in cost savings through reduced energy consumption and lower operational costs.
A catalyst for growth
We at PRIME Philippines have played a pivotal role in driving the development of these trends within the industrial market. A notable example is PRIME’s long-standing partnership with a company to establish 150,000 sqm built-to-suit central hubs. Those facilities, strategically located to serve North Luzon, Metro Manila, and South Luzon, are designed to accommodate the company’s extensive logistics and distribution operations.
The new hub, which will create nearly 5,000 jobs, exemplifies the transformative impact that build-to-suit solutions can have on a business. By providing a custom-designed facility tailored to the retailer’s specific needs, we have enabled the company to streamline operations, reduce costs, and enhance service levels across its entire supply chain. Moreover, the centralization of logistics operations within this hub has allowed the company to achieve greater efficiency and sustainability, aligning with its broader corporate goals.
PRIME Philippines’ role in this project underscores its position as a catalyst for growth within the industrial sector. By leveraging its deep market knowledge and extensive network of industry contacts, We have been able to deliver a solution that not only meets the immediate needs of its client but also supports long-term growth and sustainability.
The trends shaping the logistics and distribution sectors in the Philippines reflect a broader shift toward more efficient, sustainable, and strategically located operations. As companies continue to adapt to the demands of the modern marketplace, the role of multi-facility warehouses, centralized logistics hubs, and sustainable practices will only become more important.
PRIME Philippines is the leading real estate consultancy firm for emerging markets with offices in Manila, Cebu, and Davao. To learn more, visit primephilippines.com, or follow them on Facebook at facebook.com/PRIMEPhilippines.