The growth of online grocery sales has the U.S. market for cold-storage warehouses poised for strong growth, potentially creating demand for up to 100 million sq. ft. of cold-storage space over the next five years, according to a new report from CBRE. With 213.5 million sq. ft. of inventory, Pennsylvania, in particular the Lehigh Valley, ranks sixth in the country for cold storage space, making it an ideal location for major food producers seeking space.

“With the strategic location of Eastern Pennsylvania to major U.S. consumer markets, we expect demand for cold storage space to continue to increase,” said CBRE’s William Wolf, Executive Vice President, based in Allentown.

A recent report from the Food Marketing Institute and Nielsen projects that groceries ordered online will account for 13% of total grocery sales by 2022, up from 3 percent in 2018. Such growth would amount to an additional $100 billion in annual grocery sales conducted online. (Click here to view an interactive map of consumers’ likelihood to buy groceries online across the U.S.)

This outlook portends significant changes for the industrial cold-storage industry, which at 3.6 billion cubic feet (an estimated 214 million sq. ft.) currently accounts for a tiny portion of U.S. industrial-and-logistics real estate overall. Much of the cold-storage sector’s growth is likely to occur in gateway markets like Los Angeles and the New York area, as well as leading food-production states such as Pennsylvania.

“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 and Market Leader for greater Philadelphia.“Still, the sector’s growth will be somewhat measured because these are specialized facilities requiring significant capital, power and government approvals.”

Leading States For Cold-Storage Space

The challenges of constructing and modernizing cold-storage facilities to keep up with the strong growth of online grocery sales has driven consolidation in the industry as firms seek to gain economies of scale, according to CBRE. Four companies control 73.4 percent of the refrigerated warehouse space in North America.

To read and download the report, click here. Download may take a few seconds.

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.