Surge in Online Grocery Shopping

A surge in online grocery shopping is intensifying demand for food-storage warehouses, sparking billions of dollars in new real-estate development.

Growing Demand for Food-Storage Warehouses

Last year, 10% of groceries were ordered online, and analysts forecast it could get as high as 12% by 2025. Shopping for groceries online was taking off even before the pandemic, with services like Amazon Fresh, FreshDirect, and Misfits Market offering convenient alternatives to the supermarket. Demand soared when people started worrying that they could catch COVID-19 on a trip to the store.

Companies like Americold Realty Trust and Lineage Logistics LLC are building or preparing to break ground on tens of millions of square feet of temperature-controlled warehouses that can store meat, dairy products, produce, and other perishables. Many of the new facilities are located close to residential neighborhoods and designed to fulfill home orders more efficiently. They also feature advanced robotics and data analytics to pivot quickly if demand shifts among households, restaurants, schools, grocery stores, and other final stops on the supply line.

Rethinking Supply Lines and Future Adaptations

The global cold-storage construction market is expected to swell to $18.6 billion in 2027 compared with $7 billion in 2019, according to Emergen Research. New players in the business “are popping up all over,” said Kristin Gannon, a managing director of real-estate investment bank Eastdil Secured.

Many existing food buildings are old and inefficient and lack the safety features of new development, said Neil Johnson, founder and chief executive of Provender Partners LLC. His company is planning warehouses where perishable food can be stored, processed, and shipped to homes. These buildings can store foods at different temperatures and offer room for food company tenants to cook simple meals and prepare meal and grocery kits for home delivery.

Grocery-store chains are rethinking supply lines after panic shopping in the pandemic’s early days emptied shelves of meats, dairy products, and other perishable items. The pandemic turned the supply chain “upside down,” said John Carrafiell, a senior managing partner and co-founder of real-estate investment company BentallGreenOak, which has invested in cold storage. Distributors and warehouse companies, he added, “no longer knew where their orders were going to come from” after restaurants, schools, stadiums, and other traditional outlets closed.

Developers say that such shortages should be avoided in the future because modern food-storage facilities can adapt quickly when demand shifts from, say, schools to households. Americold, a real-estate investment trust, last year developed a record $461 million of cold-storage facilities, more than double the upper end of the guidance it had given investors.

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