Increasing Demand for Cold Storage Spurs Spec Projects, Institutional Investment

October 20, 2020

Increasing Demand for Cold Storage Spurs Spec Projects, Institutional Investment

With rising online grocery deliveries, developers and investors see an opportunity for a high-yielding bet.

October 15, 2020 | Patricia Kirk | National Real Estate Investor

U.S. online grocery sales continue to accelerate amid escalating COVID-19 cases, and this trend is likely to continue long after the pandemic subsides, boosting demand for cold storage facilities nationwide.

“COVID has accelerated and catalyzed that sector and is a huge point of growth for the industrial cold storage sector and remuneration of retail,” says Chicago-based Peter Kroner, research manager for industrial capital markets with real estate services firm JLL.  The pandemic changed the perception of online shopping for many consumers who were formerly reluctant to shop online or unfamiliar with the process, such as the elderly, he notes.

Online grocery sales represented just 3.9 percent of all grocery dollars spent at the end of 2019.  By May 2020 that figure had increased significantly, says Kroner. He predicts that in response to rising demand, grocery chains’ supply-chain infrastructure will evolve, mirroring many of the lessons e-commerce direct-to-consumer, supply-chain models have developed since 2010. These lessons include establishing separate facilities for merchandise going to physical stores and those operating as e-commerce fulfillment centers. This will have a significant upward impact on demand for cold storage space, Kroner says.

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