Steady growth in online grocery shopping was already driving demand for cold storage nationwide, but the COVID-19 pandemic is expected to accelerate that trend and contribute to even greater demand over the next five years.
Estimates from multiples real estate studies suggest that an additional 75 million to 100 million square feet of industrial freezer/cooler space will be needed to meet demand generated by online grocery sales by 2025. Researchers add that the trend will have five long-term effects on the market:
1. E-commerce grocery will become more widely adopted as consumer comfort grows with the practice. It will no longer be Millennials buying their avocados online. We’re already starting to see older generations move in this direction, particularly among those who are considered high-risk since they will want to avoid stores for some time. This will trigger the heightened demand for cold storage capacity.
2. Public refrigerated warehouse companies will likely consolidate to gain more control of the cold storage footprint. The industrial landscape is highly disaggregated today.
3. Since e-commerce is typically fulfilled by local grocery stores, retail footprints will include more storage and fulfillment space, including a greater need for infill temperature-controlled facilities in proximity to consumers. Industrial property owners will want to monitor these trends closely and begin optimizing properties for these new configurations.
4. Restaurants may see a significant shift in dining formats with less dine-in options and more delivery or take-out that would require cold storage capacity. Foodservice companies that supply restaurants may look to second-generation cold storage space as a cost advantage in a limited dining environment.
5. Automation will increase in cold storage facilities to efficiently fulfill orders and make up for a shortage of workers willing to work in the extreme conditions of these facilities. In turn, this will prompt need for higher-density, greater-height, and smaller-footprint build outs that will be required for around-the-clock operations.
Before the pandemic the ordering of groceries and perishables was small and limited. Not all retailers or groceries were participating on it. Now, the change on consumer trend has expedited the growth of this sector and is forcing all grocery stores to implement the delivery of groceries to consumers. This increase in demand for direct to consumer will increase the demand for cold storage facilities across the country.
On the investment side, investment funds are putting a priority in adding cold storage facilities to their portfolios. An 180 degree turn from a few years ago when investment funds would shy away but buying and building these facilities.
Our team has a vast experience in helping companies with the search and development of cold storage facilities. Uses include, flowers, produce, food processing and distribution, general cold storage.
If you’re looking to buy or sell industrial cold storage facilities, contact us today!
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