Logistics property in Taiwan
According to Weiland, Taiwan has a shortage of modern logistics facilities, which are characterized by multi-story buildings with high ceilings (at least six metres and up to 13.8 metres in height), solid steel or reinforced concrete structures (thick floors to bear heavy loads) with wide spaces between pillars of at least 12 metres and a sufficient number of docks (on every floor) to accommodate large trucks. In addition, good facilities need robust fire-fighting systems, modern security and surveillance systems, LED lighting, guardhouses and air-conditioning (if needed, depending on the warehouse stock). In addition, it helps to good office space, meeting rooms and rest areas to provide a good working environment for employees.
Unlike other countries, there is a lack of reliable data on logistics property supply and demand trends in Taiwan. This means, companies such as Ally have to estimate demand based on retail sales (traditional and e-commerce) and new brands entering Taiwan. Based on Ally's analysis, Taiwan requires 230,000 square metres of new logistics property space annually. While Ally estimated that Taiwan has a total of 40 million square metres of warehouse space available, much of it is not fit for purpose and up to 70% may actually be illegal (owing to illegal land use, lack of safety features or non-compliance with international standards).
This is because logistics was overlooked during Taiwan's economic boom years. Most manufacturers set up ad-hoc facilities on their own properties before shipping overseas and did not see the need for sophisticated storage facilities. However, this is changing with the global rise of e-commerce and the needs of importers of specialty goods. This means that while the overall logistics market is not growing much, there is a steady and increasing demand for modern logistics property (growing at about 3% per year, according to Ally to replace traditional facilities).
Current rental rates for storage in Taiwan range from NT$450-520 per ping (NT$136-158 per square metre), NT$500-650 per ping for modern facilities and NT$700-1,200 per ping for specialist facilities (such as dedicated, temperature-controlled storage for wine).
Yields on modern logistics property are higher than they are for their traditional counterparts. This has attracted institutional investors to the sector. However, none of the world's largest logistics developers is active in Taiwan.
Using substandard warehouse facilities exposes companies to several risks including product handling inefficiencies, damage or loss due to poor ventilation, high temperatures or water leaks, fires, inability to get insurance and even reputational damage to brands in the event of accidents or fires. Weiland noted that warehouse fires in Taiwan are frequent and account for a disproportionate share of fire incidents compared to factories or residential buildings. Weiland cited case studies which show that using modern facilities produces real benefits in terms of average rental rates (owing to economies of scale), shorter handling times and lower damages and losses.