ONLINE GROCERY SHOPPING IS CHANGING THE COMMERCIAL LANDSCAPE July 23, 2020 | Commercial Real Estate News | commercial real estate trends , warehouse , special purpose facility Online shopping has brought convenience, affordability and many other benefits to today’s consumers, but this evolution has also brought its share of logistical headaches. For one, customers have grown accustomed to faster and faster shipping methods. In fact, many people have come to expect their products delivered a mere hour after the order is placed. These expectations even hold true for those purchasing groceries online. In response, Amazon announced a two-hour grocery delivery for Prime members last year. Whether it’s for convenience or personal safety amid the global pandemic, food delivery is here to stay, and it’ll only get more competitive. The Reason While most major big box stores offer curbside pickup and plenty of third-party companies offer speedy delivery, the supply can’t always meet the demand. For one, even the largest stores aren't always equipped to store reserve stock of every product, meaning there’s a growing need for the development of commercial food warehouses with cold storage capabilities. Restaurants Joining Grocery stores aren’t the only ones looking to capitalize on online food-ordering. Restaurants both big and small may also soon be in need of commercial cold storage. Cold storage warehouses could house more options for delivery and takeout, allowing for increased offerings and more business growth. Even restaurant supply companies are interested in the benefits that cold storage buildings can offer. This “last mile” transformation can help cut down on delivery times and expenses. Gateway Sectors If you live in a smaller city, it could be quite some time before you see many cold storage facilities pop up in your area. For the time being, they are being built in mostly larger markets like Los Angeles and New York. They are also being built in high-producing states such as Wisconsin and Texas. Although growth does seem to be limited for now, cold storage facilities could very well expand to other regions in the near future. Challenge of Accommodating While commercial frozen storage has lots of potential, it does have its share of challenges. One of these challenges is trying to accommodate varieties of meats, fruits and vegetables. Different products will require different requirements to keep them from spoiling and expiring. A way to combat this is to section off portions of the building for different items, but having multiple rooms and specialized equipment gives way to another big hurdle to overcome: high costs. High Price Points Building large facilities that can preserve produce and other groceries does not come cheap. Pricing to build a cold storage facility can range anywhere from $100-$400 per square foot, depending on location. In addition to building costs, there is also the issue of large energy consumption. Compared to a traditional warehouse, cold storage uses nearly four times as much wattage. An upside is that some older refrigerant facilities do exist, but they would need significant upgrades to meet current demand. Looking Ahead Even with the large challenges facing frozen storage, the market is still promising. The level of growth that the sector has seen is equivalent to nearly $100 billion in sales. To deal with the high price points of construction and maintenance, large companies may come together to share space. Of course as time goes on and automation becomes faster, warehouses will virtually pay for themselves.