How COVID-19 impacts the cold storage industry
Unless you’re among the roughly 5,000 people living on one of the 80 residential bases in Antarctica, you’ve likely experienced a COVID-19 disruption to your operations in the last two months. It turns out Antarctica is the only continent in which humans have reported zero cases. This article is not about Antarctica, but it is – ironically – about cold storage, an industry and topic that has been at the core of Smithson’s operations for the last 40 years. With over 100 facilities completed for large operators like MBM Foods (now McLane Company) on behalf of Chick Fil-A, Mt. Olive Pickles, Southeast Frozen Foods, Egglands Best, Prestage Foods, and Piggly Wiggly we know a thing or two about developing clean, sustainable, temperature-controlled environments that are critical to providing vital products and supplies to human populations.
COVID-19 has caused disruptions across every industry, and whether we’re talking about supply shocks or demand shocks, the end effect has affected every global consumer where it matters most – at home. We remain optimistic that the shock, while severe in the short-term, will also create new opportunities in both the short- and long-term. This is especially true for those who have the vision to see where the trends are currently breaking in our particular industry. In a recent report published by CBRE, since the COVID-19 pandemic began, U.S. consumers have increased their grocery delivery or buy-online-and-pick-up-in-store (BOPIS) purchases by 100%. As many as 46% of U.S. consumers in the survey also reported that they will likely continue this behavior after the pandemic subsides. *
“Considering that 95% of food produced in or imported to the U.S. goes through third-party distribution centers before reaching consumers, this shift undoubtedly will impact the cold storage sector,” CBRE Research reported. This impact, along with regulatory changes that the restaurant and lodging industries will face as a result of COVID-19, will directly impact the growth of strategically placed cold storage facilities that can facilitate these regulatory and consumer-driven changes.
It’s worth noting that before the COVID-19 pandemic even existed, industry analysts reported that existing growth in D2C and BOPIS consumer preferences already necessitated new development of at least 75 – 100 million square feet of new cold storage space in the U.S. COVID-19 will only dramatically expand this need for the reasons previously mentioned.
In our home state of North Carolina alone, this looming demand is already being addressed by organizations like the North Carolina Ports Authority, who have recently completed a $14M renovation to their terminal that more than doubled their cold storage capacity. That is with a 100,000 square foot facility on the grounds already reaching capacity and plans for continued expansion over the next few years. This is important because it highlights the still-growing trend in our sector for more cold storage in order to sustain consumer-driven economies, and candidly, life as we know it.
*Source: CBRE Research,
https://www.cbre.us/research-and-reports/US-MarketFlash-COVID-19-Impact-on-the-Food-Industry-Implications-for-Industrial-Real-Estate
