The growth of e-commerce has increased demand for warehouse space exponentially, but one subset of that real estate sector is really heating up. Cold storage warehouses and distribution centers are suddenly in high demand thanks to new food delivery services such as Peapod by Giant, Amazon Fresh and Blue Apron.
The sector is small now, but growing rapidly.
“It is very niche. About 2% or 3% of all goods on groceries are bought online, and we expect the space could explode to 13% over the next 5 years because of the penetration of the internet,” said Spencer Levy, senior economic advisor for CBRE research.
CBRE’s forecast is based on a projection by the Food Marketing Institute and Nielsen that an additional $100 billion in annual grocery sales will be conducted online by 2022. That will likely mean big changes for the cold-storage industry, which at 3.6 billion cubic feet currently accounts for just a tiny slice of U.S. industrial-and-logistics real estate overall.
Much of the cold-storage sector’s growth is likely to occur in gateway markets such as Los Angeles and the New York City metropolitan area, as well as leading food-production states, such as California, Washington, Florida, Texas and Wisconsin.
It’s not just the delivery services driving demand, but farm-to-table and organic trends. Fewer preservatives in food require more cold storage.
“Consumers want to eat more fruits and vegetables and less processed food, so when you have fruits and vegetables that need to be flash frozen and then transported across the country to the user, that is definitely taking an uptick in demand for this space,” said Michael Carroll, an analyst with RBC Capital Markets.
While mainstream warehouse construction is growing, there is still a very limited supply of cold storage real estate, which makes it that much more valuable. The supply is also on the older side, about 34 years old on average, according to CBRE.
“So they could really benefit from some modern technology, robotics and everything,” said Levy. “I think you’re riding a crest of a wave that’s only going to get better. I think it’s a great segment of the market to be in.”
Americold is the only publicly traded temperature-controlled warehouse owner in the U.S. today. Since it went public last year, its stock is on fire.
“I think especially as Americold has gone public, there’s been a lot more interest from institutional capital sources coming into the space,” said Carroll. “So I think you’ll see more construction activity coming in, and Americold has been more active recently breaking ground on projects.”
Because as the grocery segment grows, the perishables are poised to profit, and so are those investing in really cold properties.
Source: CNBC
Larry W. Genet is a Senior Vice President in the CBRE, Inc. Miami, FL office. As part of the CBRE platform Mr. Genet can provide a wide range of services from local to Fortune 1000 clients including agency and tenant representation, asset or portfolio management, high level logistics, labor and data analytics prior to site selection, project/construction management, capital markets, owner user sales and valuation advisory services. CBRE is the global leader for real estate services worldwide.
Larry has extensive experience in landlord agency, tenant representation, acquisitions, dispositions and property management. As a third-generation commercial real estate professional and South Florida native, Larry boasts deep community ties, an intimate knowledge of the South Florida market and numerous professional contacts. Larry’s leasing expertise of industrial, office, land, retail and medical properties coupled with his experience in acquisitions and dispositions gives him the ability to represent a myriad of clients in the South Florida market. Additionally, Larry controls a portfolio of 13.5 million square feet allowing him to see every deal in the market. This ensures his clients never miss an opportunity. His knowledge of tenants and buyers in the market is top notch and when coupled with his team's vast portfolio, it's a winning combination.
