Demand from e-grocery and meal kit sales will lead to development of 70 million to 100 million square feet of cold storage space over the next five years, up from 214 million square feet currently, according to a new report from commercial real estate firm CBRE.
Nearly half of U.S. consumers shop for packaged food products online, CBRE said, citing research from the Food Marketing Institute and Nielsen, projected to reach 70% by 2022 at an annual spend rate of $100 billion.
Currently just 3% of grocery sales happen online, compared to 20% for footwear and 40% for consumer electronics, according to research from Bain & Co. and Google. That figure is expected to rise to 13% by 2022.
E-grocery buying tends to skew young, CBRE reported, based on data from Brick Meets Click. About 26% of consumers aged 30-44 actively shopped online for groceries in 2018, down slightly from 2017. However, for those aged 18-29, online grocery shopping increased from 19% in 2017 to 22% in 2018.
CBRE said cold storage accounts for a small portion of U.S. industrial and logistics real estate. Much of the sector’s growth will likely to occur in gateway markets like Los Angeles and the New York area 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 in a release. “Still, the sector’s growth will be somewhat measured because these are specialized facilities requiring significant capital, power and government approvals.”
Leaders in the cold storage sector, according to CBRE, are Lineage, with a 31.8% market share in the U.S. and Canada, followed by Americold (29%), USCS (8.9%) and VersaCold (3.8%). Due to rising costs and the sophisticated technology involved, 79% of cold storage capacity in the U.S. is outsourced.