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Vietnam: The rise of new services in post-pandemic period

Covid-19 is a catalyst that drives demand for digital infrastructure.

Cisco forecasts that global internet traffic in 2021 tripled that of 2016 and reached 3.3 zettabytes, of which traffic to online video (including Nextflix and YouTube) accounted for 82%. People used more data than ever before for livestream, movies or online meetings. The number of devices connected to the network in 2021 was three times more than the global population, with 27.1 billion devices, 43% of which were mobile connections.

These numbers show that Covid-19 is a catalyst that drives demand for digital infrastructure.

From physical to digital

In fact, when Covid-19 broke out in early 2020, the lockdown of cities across the globe, along with social distancing and the work-from-home regime changed many everyday activities, from physical to digital.

The pandemic increased the retail e-commerce market share in all markets worldwide. It is estimated that, in the post-pandemic period, online retail spending in Western Europe will increase by 442 billion euros by 2025.

Telemedicine, the provision of health care when patients and service providers are separated, increased rapidly as the pandemic unfolded. In the US, a survey for the Centers for Disease Control and Prevention reported that telemedicine usage increased by 50% in the first quarter of 2020 compared to 2019, and in the last week in March 2020 – when social distancing was implemented – the number increased by 154%.

In 2020, telemedicine platforms saw a massive influx of venture capital investment, growing 109% to $3.7 billion as investors realized the turning point from the pandemic. As the use of these platforms becomes familiar, it may be possible for routine examination and initial diagnosis to move more online.

Data centers are an essential part of any business. A JLL report notes that data center revenue is growing at 15.7% year-on-year. The cloud computing and storage services market is estimated to reach a value of $163 billion by 2021, up nearly 30% from 2017. The growth rate of data volumes will continue to be exponential, and this promises a bright future full of potential for the data center market.

The trend of ‘shopping’ online is driving demand for cold storage, which is in severe shortage in all countries around the world. An additional €1 billion in online sales will create an average demand for 75,000 square meters of warehouse space. Thus, by 2025, the online retail sector in the region will increase by 33.2 million m2 of warehouse demand.

The Global Cold Chain Alliance estimates that 0.15 cubic meters of cold storage is needed per urban dweller.

Cold storage and data centers, large factories

Many investors are racing to diversify assets, and the data center is an attractive investment opportunity not to be missed in today’s Zettabyte era. In China, new data center development funds have been launched by Gaw Capital Partners. In addition, Keppel Group has developed many funds to build and develop data centers in the Asian and European markets.

Recently, JLL received many requests to lease land or buildings for construction and development of data centers. Statistics show that most clients require 10,000 – 30,000 m2, and are from technology and telecommunications fields from the Americas, India and Japan.

As for healthcare or e-commerce, cold storage is a specialized part of the supply chain that uses heat-controlled warehouses to store and transport food or medical supplies, such as vaccines.

A report by Research & Markets estimated that $7.9 billion was invested in developing cold storage globally in 2020, a figure that will grow to $19 billion by 2027, due to the demand for online grocery shopping and reduction of food waste.

For investors, cold storage offers 50-100 basis points higher yields than dry logistics facilities, and due to high installation costs, tenants are often willing to sign long-term leases.

Michael Ignatiadis, Director of Logistics and Supply Chain, JLL Asia Pacific, said that the rapidly growing population and middle class in Asia increases the demand for fresh food and this is the main reason driving demand for cold storage.

Many other types of real estate will also continue to expand. Content producers like Netflix and Apple have used warehouse space as film studios following the explosion of video streaming services. Growing demand for studio space is driving demand for warehouses in media-strong cities like London, Los Angeles and New York.

Vietnam starts new trend

At the end of 2015, Viettel Group introduced a telehealth solution to hospitals in the North, providing important diagnostic consulting services and medical education research.

In 2020, the Ministry of Health deployed a network of remote consultation and support for medical examination and treatment connecting 1,000 medical examination and treatment facilities with nearly 30 big hospitals in Hanoi and Ho Chi Minh City. The expansion of telemedicine played an important role in the reform process of the health sector. Patients can be examined at home and consulted and treated by doctors through smart electronic devices.

Vietnam currently has no data centers built according to Tier 4 standards, while there are about 5 data centers that meet Tier 3 standards, most of which are operated by domestic telecommunications corporations.

Ms. Trang Bui, Senior Director of Vietnam Market at JLL, said that businesses in the financial, health, retail and consulting sectors that are no longer interested in the self-managed server model, and are also looking to move data to cloud solutions, and Internet of Things (IoT) device initiatives.

New types of real estate are opening up opportunities for investors as they quickly transform business models. No longer focusing on residential real estate, many domestic businesses have shifted to industrial real estate, warehousing, entertainment, as a new direction to overcome the Covid-19 pandemic.

In June 2020, THACO put into operation its fruit cold storage at Chu Lai port (Quang Nam province). This cold storage has an area of 4,800 m2, a capacity of 2,400 tons. Hung Vuong Joint Stock Company (HVG) opened a cold storage unit at Tan Tao Industrial Park in HCM City. Built on an area of nearly 4 hectares, with a total investment of 1,300 billion VND, the warehouse is installed with 60,000 pallets, with a capacity of 60,000-70,000 tons of goods. However, compared to market demand, these figures are still quite modest.

In anticipation of the market boom, a series of data centers have been built and put into operation. In 2021, a data center that meets international standards is based in Hoa Lac (Hanoi). This center, named ecoDC, has undergone 52 tests of the electrical, air conditioning, and fire protection system under the direct supervision of experts from Uptime, an organization from the US.

FPT Telecom has inaugurated the largest data center in Vietnam with an area of 10,000 m2, and a total investment of 177 billion VND in Tan Thuan 1, HCM City and the data center in Cau Giay, Hanoi, with a total investment capital of 213 billion VND. In addition, FPT Telecom invested VND 150 billion to build a data center in District 9 in HCM City and a data center in Da Nang at the cost of 40 billion VND.

Duy Khanh

Source: https://vietnamnet.vn/en/feature/the-rise-of-new-services-in-post-pandemic-period-810680.html