Is Cold Storage Heating Up?
The increase in online grocery sales will generate demand for as much as 35 million square feet of U.S. cold-storage space within the next seven years, according to a new report from CBRE.
By Keith Loria, Contributing Editor
A new report by CBRE, entitled, “Cold Storage: About to heat up?” said an increase in online grocery sales will likely result in an increased demand of as much as 35 million square feet of U.S. cold-storage space shifting from retail stores to warehouses and distribution centers within the next seven years, according to a new report from CBRE.
The rise of e-commerce will be the biggest disruptor in the segment, impacting where food is stored and how it gets to people’s homes.
“The U.S. market for warehouses and distribution centers has been on a multiyear run, but there still are segments in the relatively early stages of their growth, like cold storage,” David Egan, CBRE’s global head of industrial & logistics research, said in a prepared release. “As e-commerce expands further into the grocery business, the resulting growth of the food supply chain and demand for new, climate-controlled warehouse space could very well be the new opportunity that investors and developers have been seeking.”
Currently, the U.S. has a capacity of about 3.6 billion cubic feet of food-commodity cold storage, which is situated in 180 million square feet of industrial space, and 2 billion cubic feet of similar capacity covering 300 million square feet of retail space.
Food producers, population centers boost demand
The USDA noted that states flush with the largest food-commodity industrial cold-storage space—such as California, Washington and Florida— are most likely near major food producers and population centers.
Analysis by CBRE confirmed this, as it found greater concentrations of food-grade, cold-storage facilities occur in states with substantial agricultural production, large populations or both. CBRE estimated California as having the most industrial cold-storage space (nearly 400 million), followed by Washington state (271 million), Florida (260 million), Texas (231 million) and Wisconsin (228 million).
FMI/Nielsen revealed that while online grocery sales represented just $19 billion in 2017, accounting for 3 percent of total grocery sales for the year, projections are the category will rise to $100 billion by 2024, which would represent 13 percent.
The CBRE cold-storage report concluded that depending on the property type used to fulfill online grocery sales, up to 35 million square feet of cold storage for food distribution could be shifted from retail to industrial properties.