The growth of online grocery sales has the U.S. market for cold-storage warehouses poised for strong growth, potentially creating demand for up to 100 million sq. ft. of cold-storage space over the next five years, according to a new report from CBRE.
With 136.7 million sq. ft. of inventory, New Jersey ranks among the top 10 cold storage states in the nation, making it an ideal location for major food producers looking for space situated in one of the most well-located port centers in the country.
“Given the ongoing trend of increased demand for frozen and refrigerated food space in well-located gateway markets serving millions of online and brick-and-mortar grocery consumers, New Jersey continues to see strength in the sector,” said David Gheriani, vice president CBRE.
“Consumers’ increasing use of online ordering and grocers’ investment in new delivery strategies and warehouse technologies will continue to drive this trend.”
A recent report from the Food Marketing Institute and Nielsen projects that groceries ordered online will account for 13 percent of total grocery sales by 2022, up from three percent in 2018.
Such growth would amount to an additional $100 billion in annual grocery sales conducted online.
This outlook portends significant changes for the industrial cold-storage industry, which at 3.6 billion cubic feet (an estimated 214 million sq. ft.) currently accounts for a tiny portion of U.S. industrial-and-logistics real estate overall.
Much of the cold-storage sector’s growth is likely to occur in gateway markets like Los Angeles and New York/New Jersey, as well as leading food-production states such as California, Washington, Florida, Texas and Wisconsin.“Several factors have combined to fuel expansion of the cold-storage space, from consumers’ increasing use of online ordering for groceries to grocers’ investment in new delivery strategies and warehouse technologies,” said Adam Mullen, CBRE’s Industrial & Logistics Leader in the Americas.
“Still, the sector’s growth will be somewhat measured because these are specialized facilities requiring significant capital, power and government approvals.”
The challenges of constructing and modernizing cold-storage facilities to keep up with the strong growth of online grocery sales has driven consolidation in the industry. Four companies control 73.4 percent of the refrigerated warehouse space in North America.