Thanks to the millennial generation’s love of online shopping, the latest research suggests that 70 percent of consumers will shop for their groceries through the internet in the next seven years. With US consumers readily embracing online grocery shopping, cold storage facilities for storing frozen goods are increasingly in demand. In this post, we explore the rising demand for US cold storage and highlight what to look for when sourcing them.
The Link Between E-Commerce and US Cold Storage Growth
E-commerce is having a prominent impact on the commercial real estate industry. Pinned for single-handedly collapsing the traditional brick and mortar retail market, e-commerce has also driven demand for commercial real estate space in other areas. With shoppers now having access to the retail world at a click of the mouse, the commercial real estate sector has seen a sharp rise in demand for industrial real estate. With hundreds of suppliers looking for space to store, manufacture, and distribute their goods, demand is markedly outmatching supply.
A rise in online grocery shopping is predicted to see calls for greater US cold storage space increase by over 35 million square feet. FMI/Nielsen report that 3% of grocery sales currently take place online, but this figure is predicted to soar to 13% by 2024. A steady rise in the number of consumers dining out has come hand in hand with demands for fresh produce, increasing the need for refrigerated warehouses in cities across the US. Grand View Research, Inc predict that the cold storage market will hit 212.54 billion USD in 2025.
America’s retail giants Amazon and Walmart are also tapping into the lure of convenience that e-commerce provides consumers. Amazon recently hit headlines for its purchase of Whole Foods. The retailer now offers grocery shopping online through its popular e-commerce platform. Commentators predict that Amazon will soon rival America’s biggest grocers. L2 Inc Research’s Director Cooper Smith argues that Amazon will likely be one of the five biggest grocers in America within the next five years.
Walmart has also begun to invest extensively in e-commerce, with the supermarket franchise stepping up its e-commerce game – leading to a 63% increase in online sales. Walmart also recently acquired Parcel, a promising delivery start-up, to provide its customers with same-day grocery deliveries through their online platform.
The Cold Storage Warehouse: A Smart Investment?
JLL reports that the refrigerated warehouse industry will soar 3.4% each year from 2014 to 2019. However, we are only expecting to see an annual 1% growth in the number of US cold storage facilities over the same period.
The highest number of cold storage facilities reside in states with large populations and strong agriculture. According to a new CRBE report on cold storage warehouses, California boasts the highest number of cold storage facilities in the US (400 million). Washington is home to the second-highest number of cold storage buildings (271 million), followed by Florida (260 million), Texas (231 million), and Wisconsin (228 million).
CBRE’s head of research on industry & logistics David Egan highlights that cold storage buildings are a wise investment opportunity for investors. He notes, “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.”
Cold Storage Facilities: Other Areas Impacting Growth
Beyond the e-commerce boom, the US government have put stringent regulations in place for the manufacture and supply of perishable products, leading to greater demand for cold storage warehouses in 2018.
The automatization of the refrigerated warehouse with the rising prevalence of AI technology, conveyor belts, and the automatization of truck loading is set to accelerate growth in the US cold storage market. Automation is also set to impact asset selection, as automated truck loading may eradicate the need for parking ratios and other traditional building features.
What Should You Look for When Sourcing a Cold Storage Building?
When sourcing a cold storage warehouse for sale, location should be at the forefront of your mind. Americold’s Jason DeLoach explores how centers of consolidation drive the demand for US cold storage buildings:
“Centers of consolidation—be it people, producers, processes, distribution networks or other infrastructure centers—are becoming more common as ideal locations for import- or export-focused facilities. The longer a majority of product can be stored and transported together, the greater the cost benefit. For example, it’s more cost effective to shell a load of shrimp in one location before they are distributed. It’s easier to get a quantity of beef inspected all together. And, it’s easier to fumigate or ripen produce at one time.”
Urban locations are a wise choice for those looking to invest in refrigerated warehouses, cities provide strong distribution networks and a large pool of consumers. You can use Reonomy to source off-market buildings and commercial real estate assets for sale in urban hotspots by using our popular radius search filter. The radius search filter can be used to draw on the map in the area of your desired location to search from thousands of promising assets.
Ready to Begin Your Search?
Cold storage facilities are the up-and-coming commercial real estate investment of 2018. If you’d like to begin the search for your next lucrative investment, get started with a free trial of Reonomy.