Demand for Industrial Cold Storage to Increase as Result of COVID-19

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Demand for Industrial Cold Storage to Increase as Result of COVID-19

By Mike Troy - 04/16/2020
Online grocery sales driving demand for refrigerate/frozen space is COVID-19 world.

The COVID-19 pandemic is creating massive disruption in the food industry, which will result in increased demand for industrial cold storage space in the U.S., according to a new CBRE report.

As many consumers shelter in place, online grocery sales have increased dramatically. The global real estate services firm CBRE explored the relationship between e-commerce grocery growth and cold storage warehouse capacity in its Food on Demand Series: Cold Storage Logistics Unpacked, suggesting that an additional 75 to 100 million square feet of industrial freezer/cooler space will be needed to meet the demand generated by online grocery sales in the next five years. The COVID-19 pandemic will likely accelerate this need for space, creating what CBRE sees as five long-term impacts for the cold-storage sector. For example.

  • E-commerce grocery will become more widely adopted as consumer comfort grows with the practice. This will trigger the aforementioned heightened demand for cold storage capacity.
  • Public refrigerated warehouse companies will likely consolidate to gain more control of the cold storage footprint.
  • 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.
  • 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.
  • Automation will increase, prompting higher-density, greater-height and smaller-footprint buildouts that will be required for around-the-clock operations.

 “Until recently, consumers were not ordering a lot of perishables online, but that will likely change in a post-COVID-19 environment,” said Matthew Walaszek, associate director of Industrial and Logistics research for CBRE. “Now, we are seeing consumers trend toward buying foods online such as frozen meats and poultry. To meet this new demand, we will need more temperature-controlled space.”

Considering that 95% of food produced in or imported to the U.S. goes through third-party distribution centers before reaching consumers, the online shift undoubtedly will impact the cold storage sector, according to CBRE. Although economic conditions typically dictate how frequently consumers eat out, they don’t dramatically impact the demand for cold storage space either way. Food moves in and out of warehouses whether its destination is a restaurant, grocery store or the consumer, according to CBRE. Since restaurants are down to 10% to 20% of capacity and are only fulfilling delivery orders, there’s been a shift to grocery that has forced distributors to adjust supply chains. U.S. food sales have risen steadily since 2000 except for a minor blip in 2009, including food purchased in grocery stores and restaurants. Although the near-term impact is a decrease in restaurant sales, grocery sales likely will have a disproportionate uptick in 2020.

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