09 September 2022
Demand for logistics space in Taiwan has been particularly strong over the last couple of years, driven by two trends that are largely attributable to the pandemic - the growth of e-commerce, and the increasing demand for microchips and semiconductors, of which the country is a leading supplier, given the shift to remote working. These trends bring with them increased - and likely sustained - demand for logistics buildings to serve such growing sectors. In the midst of a period of such demand for the sector, often referred to as a boom, it is imperative that facilities are constructed to not only meet this demand, but also ensuring that they support Taiwan’s goals on carbon emissions.
First, let us look in more detail at what has driven logistics growth in Taiwan. Its e-commerce market for pure online platforms grew at 16.2% in 2020, reaching NT$241.2bn (about US$8.6bn), according to data from the Ministry of Economic Affairs.(1) Although Taiwan’s retail sector initially suffered with the onset of COVID-19, it later grew by 3.5% year-on-year in the second half of 2020, underpinned by strong domestic demand. As local consumers preferred to avoid face-to-face contact at the height of the pandemic, the sector was supported domestically by the government’s subsidy that encouraged bricks and mortar retailers to shift to online business. The 19% year-on-year increase in e-commerce sales in 2020 demonstrated willingness amongst consumers to shop online and for retailers to further develop their online businesses.(2) More recently, retail sales grew by 17.2% in July 2020 year-on-year, down from the 22.5% seen in June, amid declining base year effects.(3) From this year through 2027, the e-commerce market is expected to grow at a CAGR of 9.6%, as distribution services continue to evolve.(4)
Taiwan is also expected to continue to benefit from its role in the global supply for microchips, where international supply has been constrained since the start of 2021.(5) Taiwan Semiconductor Manufacturing Corporation is the world’s largest chip manufacturer, accounting for 54% market share, and supplying chips to the likes of Apple, Intel and Nvidia.(6) The global shift towards remote working and online shopping during the pandemic spurred on rapid growth in the demand for computers, home electronics and smartphones, and this was a key factor driving the sector and underpinning Taiwan's strong economic performance in recent years. From the supply perspective, factories shut down for extended periods in some locations around the world, particularly at the start of the pandemic and this impeded the ability for supply to meet demand.
Even as world trade slumped sharply due to the pandemic, Taiwan’s exports rose by 4.9% in the 2020 calendar year, mainly due to strong exports of electronics, and in particular, semiconductors. The country’s exports further grew by 15.4% in Q2 2022 year-on-year, reflecting the strength of global electronics demand.(7) Recent reports indicate that Mainland China and Hong Kong account for 42%, and the U.S. a 15% share, of Taiwan’s exports last year.(8)
In the past three years, there have been 22 major transactions of warehouses and logistics facilities valued at NT$29.94 billion (US$1.05 billion).(9) Taiwanese e-commerce platform, Momo, set up a logistics subsidiary, named Fu Sheng Logistics, with a fleet of 200 couriers and more than 100 vehicles, while PChome established PChome Express in 2018, which has 250 couriers and 200 vehicles.(10)
Northern Taiwan (Keelung, New Taipei City, Taipei, Taoyuan and Hsinchu) is the biggest logistics hub at present, though new clusters are emerging in the centre, in Taichung, and the south, in Tainan.11 As demand has grown, so too has the logistics sector’s carbon footprint. The sector must therefore start tackling – and indeed lowering - its emissions and will come under growing pressure, from both the public and regulators, in this regard. Taiwan’s target was previously to halve carbon emissions between 2005 and 2050, but at present, its government is looking at potential paths to zero greenhouse gas emissions by 2050.
Building greener distribution and warehousing facilities should be an easy decision for operators, leading to lower operational costs alongside improved green credentials. To do this, warehouse energy systems must become smarter, using technology to reduce and optimise consumption. Energy efficiency in the industrial sector must be balanced against the requirements to illuminate and heat the often-large working spaces, to keep the workforce safe and comfortable.
These requirements are leading to developments which point the way towards an environmentally friendly future, and developers are also considering the carbon footprint generated by a building’s construction - its embodied carbon.
Environmentally-aware building methods – including modular and steel frame construction – have been used in housing and commercial schemes, and around the world, it is encouraging to see the increased use of these greener construction methods when creating industrial warehousing space.
Linesight is already active in the Taiwanese market, and helping clients to build greener is a cornerstone of Linesight’s approach. As the logistics sector continues to thrive and evolve, its contribution towards Taiwan achieving net zero emissions will only grow. By acting now to go green, logistics can - and should - set an example of how to navigate a building boom sustainably.
(1) International Trade Administration
(2) AmCham Taiwan
(7) Focus Taiwan
(9) Taipei Times
(10) Taipei Times
(11) Taipei Times