A trip to your local grocery store or an attempt to secure an online delivery order over the last several weeks has made it clear that the U.S. food supply chain is in distress. Empty store shelves, unfulfilled online orders, and the fear of visiting grocery stores have consumers stockpiling food and supplies to last for weeks or even months. Food distributors are responding to the dramatic changes in consumer shopping habits wrought by COVID-19 in record time. This change in behavior is likely to stay with us for quite some time, making one thing very clear to distributors—increased cold storage is key to securing the U.S. food supply chain.
According to global real estate firm CBRE, 95% of food produced or imported in the U.S. goes through third-party distribution centers. This means that changes in distribution resulting from the COVID-19 pandemic will require more cold storage capacity. CBRE explored the relationship between e-commerce and cold storage in their Food on Demand Series: Cold Storage Logistics Unpacked and found that an additional 75 million to 100 million square feet in freezer/cooler space will be needed to meet changing consumer habits. COVID-19 has accelerated this demand.
Cold Storage is a Smart Long Term Investment
Acquiring cold storage is not a quick fix or a short-term solution. Rather, it’s a long-term investment that’s likely to ensure security in the food supply for years to come. As states reopen with signs of Coronavirus starting to recede, consumer food shopping habits are highly unlikely to return to pre-pandemic style shopping.
E-commerce grocery shopping will likely continue growing and will most certainly include more perishable items. A Brick Meets Click/Shopper Kit survey found that 46% of respondents will continue to purchase goods online even after the pandemic subsides. Currently the majority of e-commerce grocery is fulfilled by local stores, meaning they will require more cold storage and fulfillment space to meet demand. Frozen and fresh produce have a limited handling time outside of refrigeration and must have adequate storage during the time they are chosen and then delivered to the consumer.
Demand for cold storage was rising well before COVID-19 hit the American lexicon as consumers showed a growing preference for fresh, organic food along with higher quality milk, eggs, and produce. Larger cold storage facilities made it possible to gradually align grocery store offerings with what consumers wanted – which is no longer possible now with the sudden increase in online ordering for delivery or pick-up. Additionally, food that was typically going to restaurants is now being diverted to grocery stores, stretching storage capacity even further. Distributors have a great need for cold storage.
It’s not just grocery stores requiring increased access to cold storage. COVID-19 has been particularly harsh on the restaurant industry. Restaurants that have remained open are only fulfilling delivery orders, a model likely to continue for a while in some parts of the country. Even when the pandemic begins to ebb consumers will be leary of dining in restaurants, continuing the increase in demand for takeout options. Answering to this shift in diner behavior, restaurants will need to increase their cold storage capacity to keep food fresh longer, as will the food service companies that supply restaurants.
Changes are Coming for Industrial Real Estate
All of these changes in consumer behaviour and the corresponding needs of grocery stores, e-commerce grocers, and restaurants will translate to a shift in industrial real estate as well. The cold storage submarket has largely been made up of disparate companies, and many were beginning to consolidate before the pandemic. The consolidation of public refrigerated warehouse companies is likely to happen faster now in order to gain increased control of the cold storage footprint.
Additionally, as consumers demand greater quantities of frozen and perishable foods, cold storage space will need to be closer to consumers to allow grocery stores to fill increased orders. Local industrial real estate specialists should be prepared to meet the needs of food suppliers in their regions.
Finally, facilities will also start looking into ways they can increase automation in operations to meet rising demands. Facilities should be prepared to support automated storage and retrieval systems (AR/RS), and other forms of advanced robotics that will allow the food supply chain to distribute food faster and ensure that stock is properly rotated for maximum freshness. More so, cold storage companies will increasingly onboard the Internet of Things (IoT) capabilities to reduce problems like spoilage from temperature failures or other types of contamination or system failures.
Our map-based real estate application, LandVision, makes site selection for warehouse space fast and easy, helping connect suppliers to cold storage spaces faster. Because LandVision ties over 300 property and tax attributes to parcel boundaries, brokers and developers alike can quickly find the properties in their markets that are capable of holding a refrigerated warehouse facility. Additionally, grocers can find ideal spaces closest to them to be able to better answer local demands.
Using LandVision’s aggregate acreage search function, we’re able to search for either single properties or groups of properties that add up to a target lot size, which we’ve set at a range of 1.25-2.5 acres. Since cold chain facilities also function similarly to last-mile fulfillment centers, we’ll further limit our search to only properties within one mile of freeway/highway access.
Brokers/developers can search broadly for results and can then narrow results as needed by adding additional criteria like assessed value or properties located in opportunity zones. You can list properties and compare characteristics side-by-side, export the list as a spreadsheet to add to a CRM, or even generate address labels to send personalized mailers to property owners. You can also generate in-depth site profile reports with a single click. This will reveal transaction history, proximity to hazards, aerial imagery, and the demographic breakdown of the area within a specified distance or drive time of the property.
Best of all, we are able to conduct all of this due diligence within LandVision, without the need to track down information from the county assessor or toggle between multiple applications. In minutes, we’ve got actionable data that we can use to make confident decisions on where to place a cold chain facility.
Learn More about How LandVision Can Help Your Business
Through the delivery of market-leading workflow, data and GIS capabilities, LightBox enables the success of over 100,000 CRE brokers and investors, 1,100 banks and lenders, 2,000 appraisal firms, 5,000 environmental consulting and engineering firms as well as thousands of home builders, land developers, government agencies, and energy companies. Contact us today to learn how LandVision can help you find off-market opportunities and win more deals, or schedule a free demo!
Category Commercial Real Estate