Cold Storage Pipeline Grew to 3.3M SF in Q2

There was 3.3M SF of speculative cold storage development under construction in the US in Q2 2022, which is ten times more than the pre-pandemic pipeline, which totaled only 300K SF in 2019, according to a new report from CBRE.

CBRE is projecting that demand for cold storage, which has been turbocharged during the pandemic by e-commerce sales of groceries, particularly frozen foods, will continue to be lifted by e-commerce as the online share of grocery sales grows to a projected 21.5% by 2025 from the 13% it notched at the end of 2021.

“With increased demand for perishables, cold storage capacity has been strained by transportation backlogs, inflation and labor shortages exacerbated by the pandemic. This has led to declining stock levels of primary food commodities,” CBRE reported.

According to the USDA, the rolling four-quarter average of total US stock levels of primary food commodities has dropped from a pre-pandemic level of nearly 30B lbs. to approximately 26.6B. Meanwhile, in 2021, US imports of perishable food products increased by 27%.

“Growth in cold storage utilization is creating new sources of demand as warehouses struggle to maintain normal stock levels,” CRBE’s report stated.

As of October 2021, online purchasing of refrigerated and frozen foods rose 58% YoY, with frozen food purchases accounting for 13% of total online grocery sales.

Nearly 40% of respondents to CBRE’s 2022 Investors Intention Survey said they were pursuing cold storage assets this year, up from 22% in 2021 and barely 7% in 2019.

CBRE said in its new report that the high construction costs and complex user requirements will pose “barriers to entry” for new players into the developing cold chain.

Consolidation during the pandemic in what is known as the public refrigerated warehouse industry has put more than 80% of the North American cold storage inventory into the hands of just three players.

The two leaders, Lineage Logistics and Americold, now account for a combined 71% of cold storage space, while United States Cold Storage has increased its market share to 10%, according to data from Global Cold Chain Alliance.

“As technological systems become more sophisticated in this highly specialized industry, the benefits of economies of scale far outweigh the operational challenges brought on by increased size,” CBRE said.

The gross refrigerated storage capacity in the US increased by 2.2% since 2020, now measuring about 3.7B cubic feet of space. According to CBRE, California is the leading state in cold storage space with an estimated 16.5M SF, followed by Washington (12.3M SF); Wisconsin (11.9M SF); Texas (10.9M SF); and Florida (10.1M SF).