According to Statista, online grocery shopping in the U.S. will more than double from $14.2 billion in 2017 to $29.7 billion in 2021.
With U.S. consumers readily embracing online grocery shopping, cold storage facilities for storing frozen goods are increasingly in demand.
In this article, we explore the rising demand for cold storage in the U.S. and highlight what you should be looking for if you’re planning to invest.
We’ll also look at how you can find your next investment with ease.
The Link Between E-Commerce and Cold Storage Growth
E-commerce this, e-commerce that… It’s one topic of discussion that’s hard to escape nowadays, especially as it relates to commercial real estate.
I.e. is it really the retail apocalypse? Will the supply for warehouses continue to outpace to demand?
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.
One result of e-commerce that is a bit less talked-about, however, is the rise of cold storage across the United States.
Not long ago:
- CBRE predicted that the rise in online shopping would call for more than 35 million square feet of cold storage space will shift from retail to industrial.
- FMI/Nielsen also predicted that grocery sales would soar to around 13% by 2024.
- Grand View Research, Inc. predicted that the cold storage market will hit $212.54 billion in 2025.
America’s retail giants Amazon and Walmart are also tapping into the lure of convenience that e-commerce provides consumers.
Amazon’s purchase of Whole Foods was a fairly clearly sign of their intentions to move into the grocery market.
Walmart has a completely separate web address for those that would like to shop only for groceries.
In 2017, L2 Inc.’s Director of Amazon Research, Cooper Smith, argued that Amazon would likely be one of the five biggest grocers in America within 5 years.
Walmart has put a great deal of effort into improving their overall online sale—including groceries—and so far, those efforts are working out quite well.
Walmart’s acquisition of Parcel was also a clear sign of their intentions to improve their online shopping experience.
Parcel is a same-day, last-mile delivery company focused primarily on perishable and non-perishable goods.
Enough numbers and examples, you say? Fair enough.
So then, does all of this make cold storage a good investment for those looking to build their CRE portfolio? Let’s take a look.
Non-E-Commerce Factors Impacting Cold Storage Growth
Beyond the e-commerce boom, the US government have put stringent regulations in place for the manufacture and supply of perishable products.
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.
Are cold storage warehouses a smart investment?
The highest number of cold storage facilities reside in states with large populations and strong agriculture.
According to a CRBE report on cold storage warehouses, California boasts the highest number of cold storage facilities in the US (396 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.
Egan 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.”
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 explored 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.
How to Identify Cold Storage Facilities to Invest In
Reonomy’s property intelligence platform allows you to search off-market and identify properties likely to sell in any U.S. market—including cold storage and other warehouse properties.
Search any urban or other location for properties that haven’t been sold in a long period of time. Identify cold storage facilities with very specific transaction and ownership histories.
Reonomy also gives you access to cold storage owner contact information, allowing you to make calls directly to decision-makers and make a deal.