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Cold storage warehouse demand to rise with popularity of online grocery shopping

Matt Baker March 16, 2018
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Mirroring the symbiotic growth between e-commerce and warehouses/fulfillment centers, the increased appeal of online grocery could result in higher demand for cold-storage space. According to a new report from CBRE, up to 35 million square feet of U.S. cold-storage space could shift from retail stores to warehouses and distribution centers within the next seven years.

“The U.S. market for warehouses and distribution centers has been on a multiyear run, but there still are segments in the relatively early stages of their growth, like cold storage,” said David Egan, CBRE global head of industrial & logistics research. “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.”

According to CBRE estimates, roughly 180 million square feet of industrial space is currently used for food-commodity cold storage space while grocery stores and other retail venues account for about 300 million square feet of space. But that ratio between industrial and retail cold-storage space will shift in the coming years.

E-commerce is poised to disrupt the grocery marketplace, with online grocery sales expected to grow from 3 percent of all grocery sales in 2017 to 13 percent by 2024, according to findings from the Food Marketing Institute and Nielsen. Based on that projection, CBRE calculates that demand for as much as 35 million square feet of cold-storage space will shift from retail properties to industrial.

The shift to cold storage warehousing will also be a more effective use of space. Even at the status quo of 180 million square feet of industrial to 300 million square feet of retail, industrial accounts for 3.6 billion cubic feet versus retail’s less efficient 2 billion cubic feet.

CBRE’s analysis found that larger concentrations of food-grade, cold-storage facilities occur in states with substantial agricultural production, large populations or both. Illinois is a top-ten market nationwide, with 188 million cubic feet of cold storage space. California tops the list with the most industrial cold-storage space (nearly 400 million), followed by Washington state (271 million), Florida (260 million) and Texas (231 million).

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CBREcold storageFood Marketing InstituteNielsen
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