Feb. 20, 2019
Avison Young Report: Online Grocery, Cold Storage, among Top 5 Trends Shaping Food Related Industrial Space
The expanding market for food that is fresh, organic, or packaged for convenience continues to drive demand for industrial space. This is particularly true in the Midwest, where the central location bodes well for the processing and distribution of grains, dairy and meats that tie into the food sector.
While the food industry is thriving, there remains a shortage of cold storage space in many markets. According to a Q1 2019 report from Avison Young’s National Food Services Group, the demand for cold storage far outweighs availability in many markets, including New Jersey, New York, and Los Angeles.
“We continue to see a shortage of efficient and modern cold storage facilities in most markets across the U.S., as the industry tries to catch up to the rapid growth in demand for fresh and organic foods and online grocery delivery,” says Todd Heine, an Avison Young Principal and leader of the Chicago-based National Food Services Group. “Cold storage facilities are more costly to build, due to the specialization of the required infrastructure and limited ‘in-fill’ last mile land scarcity.”
As the industry grapples with this shortage, developers are taking advantage of new technologies to be able to build high capacity and highly efficient cold storage facilities on smaller sites, says Heine.
According to the report, an estimated 4 to 8 percent of the 888.6 msf of industrial space added in the U.S. since 2016 supports the food industry with warehouse, distribution, fulfillment and related uses.
Top 5 Food Industry Trends
According to the report, the Top 5 trends to watch are:
- Online grocery— Avison Young’s Food Services Group expects to see continued growth in processing and distribution, which will impact industrial space utilization.
- Cold storage— Increased demand but limited supply, particularly in primary distribution markets. Development challenges (cost, availability of land) are impacting the market’s ability to add new space.
- Last mile— will continue to expand to meet demands from growing online grocery and fresh food sectors. Expect to see increased competition for space near large population bases.
- Expanding use of automation— as companies look to improve efficiencies, particularly in light of the shortage of labor
- Food safety will be a bigger focus— as companies look closely at where food is sources and how the facility can support food safety and specialized