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 Online Grocery Sales Drive Massive Demand for Cold Storage Development in U.S.

Online Grocery Sales Drive Massive Demand for Cold Storage Development in U.S.


According to a new report from CBRE, the growth of online grocery sales has the U.S. market for cold-storage warehouses poised for strong growth, potentially creating demand for up to 100 million sq. ft. of industrial cold-storage space over the next five years.

That forecast stems from a projection by the Food Marketing Institute and Nielsen that groceries ordered online will account for 13% of total grocery sales by 2022, up from 3 percent in 2018. Such growth would amount to an additional $100 billion in annual grocery sales conducted online. 
 
This outlook portends significant changes for the industrial cold-storage industry, which at 3.6 billion cubic feet (an estimated 214 million sq. ft.) currently accounts for a tiny portion of U.S. industrial-and-logistics real estate overall. Much of the cold-storage sector's growth is likely to occur in gateway markets like Los Angeles and the New York area as well as leading food-production states, such as California, Washington state, Florida, Texas and Wisconsin.
 
"Several factors have combined to fuel expansion of the cold-storage space, from consumers' increasing use of online ordering for groceries to grocers' investment in new delivery strategies and warehouse technologies," said Adam Mullen, CBRE's Industrial & Logistics Leader in the Americas. "Still, the sector's growth will be somewhat measured because these are specialized facilities requiring significant capital, power and government approvals."

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 The challenges of constructing and modernizing cold-storage facilities to keep up with the strong growth of online grocery sales has driven consolidation in the industry as firms seek to gain economies of scale, according to CBRE. Four companies control 73.4 percent of the refrigerated warehouse space in North America.
 
"Few sectors of commercial real estate will undergo as much transformation in the coming years as the cold-storage industry due to e-commerce's impact on this previously underpenetrated market," said Matthew Walaszek, CBRE Associate Director of Industrial & Logistics Research, Americas. "We will see robust demand, further innovation in delivery and automation, and possibly more consolidation among major players.

 

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