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Rise of Online Grocery Sales, Modern Space Sets the Stage for New Warehouses

The growth of online grocery sales could result in demand for up to 35 million-sq. ft. of U.S. cold storage space over the next seven years, while aging U.S. warehouse inventory not meeting the needs of today’s logistics tenants is creating new development opportunities nationwide, according to two reports by CBRE Group, Cold Storage: About to Heat Up? and Old Storage: Warehouse Modernization in Early Stages.

Although 1 billion-sq. ft. of modern warehouse space was built over the past 10 years, it accounts for only 11% of the country’s total warehouse inventory (9.1 billion-sq. ft.), which has an average age of 34 years. Nearly 1 billion-sq. ft. of total warehouse inventory is more than 50-years-old and has clear heights of less than 20-ft., which is well below logistics tenant requirements.

According to CBRE, warehouses built since 2008 are generally three times larger than older ones, but account for only 4% of the nation’s total number of buildings.

As e-commerce expands further into the grocery business and more consumers shop online, the demand for new cold storage space in the U.S. will increase. CBRE estimates there is 180 million-sq. ft. of cold storage in refrigerated warehouses and 300 million-sq. ft. in supermarkets and other grocery stores.

Larger concentrations of food-grade, cold-storage facilities occur in states with substantial agricultural production, large populations or both.

Chains from Kroger, Target and Walmart to Smart & Final and Sprouts Farmer’s Markets are looking to up their online business by offering home delivery and pickup services.

For the full story, go to this week’s Food Institute Report.