Food-Shopping Trends Fuel Cold Storage
As food-related e-commerce operations have grown, so have tenants’ needs for temperature-controlled storage facilities.
How consumers shop for food is driving demand for cold storage facilities in new ways and new markets, according to a new report from Marcus & Millichap.
Even with the pandemic well behind us, households continue taking advantage of online delivery and pickup options for food. As food-related e-commerce operations have grown, so have tenants’ needs for temperature-controlled storage facilities.
The grocery segment has the most upside for growth among major e-commerce sectors, according to the report, and should these recent demand trends for online grocery shopping continue, Marcus & Millichap estimates that the segment would become the largest e-commerce category by 2026 – which points directly for greater tenant needs for cold storage spaces.
More than a net of 3 million square feet of cold storage spaces was absorbed over each of the past four years — exceeding the 2007 to 2019 annual average by more than 11 percent.
Population shifts to the Sun Belt and Mountain regions lately have altered US food consumption patterns, calling for better-located facilities to serve the needs more efficiently.
The benefits are plentiful with cold storage facilities enabling food producers, restaurant service providers, and grocers to manage inventory more resiliently, according to the report, by typically giving them off-site locations to store perishable goods.
Tenants also gain the chance to access direct-to-consumer channels without taking up additional production and retail space.
“Sites located near residential hubs will be especially coveted, reducing lead times for companies storing and transporting food,” according to the report.
And when it comes to new facilities, cold storage construction lags migration, Marcus & Millichap said.
“New cold storage projects have been somewhat infrequent, intimating at a growing mismatch between the geographic concentration of existing stock and recent migration trends,” according to the report, which cites fewer than 18 million square feet of cold storage space having been delivered since 2019.
Greater cost and complexity compared to traditional industrial properties is a reason for lacking new space.
“Many existing spaces may be physically and locationally mismatched to tenants’ e-commerce needs,” according to the report.
Florida and North Carolina are such examples, where population growth has recently surged to record levels.