Note: Not seasonally adjusted.
Source: U.S. Census Bureau, March 2020.

Industrial Real Estate Implications

Public refrigerated warehouse companies (PRWs) and online grocers have seen a surge in demand as consumers shelter in place. There has been a corresponding uptick in short-term requirements for freezer/cooler space—anywhere from three months to one year. Nevertheless, companies are waiting to make long-term real estate decisions and focusing on keeping employees safe and healthy during this disruptive period.

Looking ahead, the long-term effects of COVID-19 will change the cold storage sector in five critical ways:

  1. E-commerce grocery will become more widely adopted. Given the increase in online grocery shopping, there will be heightened demand for cold storage capacity; however, the volume of perishable orders will need to grow in order to have a significant impact on cold storage real estate decisions. In general, there is a recent consumption trend toward food that drives demand for temperature-controlled space, like frozen meat and processed poultry (Figure 2). Until recently, consumers were not ordering a lot of perishables online, but that likely will change in a post-COVID-19 environment.
  2. Since e-commerce is typically fulfilled by local grocery stores, retail footprints will include more storage and fulfillment space. As online orders rise, there will be a blending of retail and industrial space, as well as a greater need for infill temperature-controlled facilities in proximity to consumers. Space requirements will vary among food retailers, but additional modern space likely will be needed considering that the average age of cold storage warehouses is 34 years.
  3. Restaurants may see a significant shift in dining formats with less dine-in options and more delivery or take-out that would require cold storage capacity. Foodservice companies that supply restaurants may look to second-generation cold storage space as a cost advantage in a limited dining environment.
  4. There will be further consolidation among major PRWs to gain more control over the cold storage footprint in the U.S. This will lead to specialized development in major metros where large cold storage operators will partner with developers to strategically build a network in proximity to population clusters.
  5. Automation will increase in cold storage facilities to efficiently fulfill orders and make up for a shortage of workers willing to work in the extreme conditions of these facilities. This will prompt higher-density, greater-height and smaller-footprint buildouts that will be required for around-the-clock operations.

Figure 2: Perishable Food Sales Growth