12
Sep
2019
Cold Storage Development is Heating Up
Posted On September 12, 2019
By Kathryn Hamilton, CAE
And has No Comment
CBRE reports that the growth of online grocery sales is surging, and that equates demand for cold storage that could soar up to 100 million square feet during the next five years. A panel at I.CON East 2019 talked through the costs, challenges and opportunities for cold storage. Here are the top takeaways:
- The food supply chain hasn’t seen a lot of evolution, but that’s changing with e-commerce’s entrance into the grocery game. E-grocery sales are projected to grow 18.2% to $19.89 billion this year and e-grocery is ranked as the fastest-growing product category online. This equates big changes in the supply chain and is putting the focus on transportation optimization that streamlines delivery direct to the consumer. And grocery e-commerce isn’t just skyrocketing in the U.S. — of the top 10 markets, China made up 32% of the world’s e-grocery retail sales.
- The last mile remains as the biggest challenge in cold storage, primarily because not every carrier can handle keeping temperature-sensitive products safe and satisfy client delivery demands. As a result, companies are testing new ways of packaging and delivering goods, from more insulated containers to controlled pick-up points. This means greater opportunity for building design too, as these shifts move interiors away from traditional palettes.
- It’s still the very early days in institutional investment in this space. Foreign investors are active in cold storage, particularly investors from Canada and Southeast Asia. Cold storage is no longer thought of as a standalone product – it is identified as a subset of industrial, and investors are confident in putting their money into something that is considered part of the supply chain. Investors are toying with the idea of spec development, but it’s not happening quite yet.
- 3PLs are primarily looking to build new product, which takes 12 months of planning and 18 months to get it out of the ground. Most companies are trying to slowly slide out of the older product, and that product is being backfilled by smaller, regional companies or converted into food processing centers.
- Kroger is emerging as a major player in e-grocery and cold storage thanks to a new partnership with U.K.-based online grocer Ocado. The duo is constructing a reported 20 robotically operated warehouses in the U.S., the fourth of which recently broke ground in Dallas. This shifts fulfillment away from individual stores with the expectation that orders will be fulfilled from automated warehouses, which lowers costs and allows employees to better serve customers.
- Amazon’s cold storage play took a big leap forward with its acquisition of Whole Foods, but the company’s Amazon Fresh product hasn’t been considered a success. The company is reportedly retrenching and shifting resources to the bricks and mortar asset of the Whole Foods network, all the while strategizing on its next step to get fresh products to its vast customer base. Will Kroger beat them to the punch with the Ocado partnership? Some say maybe, given Kroger’s well-established brand and big investment into Ocado’s strong platform.
This post is brought to you by JLL, the Social Media and Conference Blog sponsor of NAIOP’s I.CON East: The Industrial Conference. Learn more about JLL at www.us.jll.com or www.jll.ca.
Kathryn Hamilton, CAE, is Vice President for Marketing and Communications at NAIOP Corporate.
