How Demand for Fresh Food is Squeezing Cold Storage Space
By Jones Lang LaSalle (JLL)
Saturday, 27th November 2021

People turning to online grocery shopping is pushing up demand for refrigerated warehouses, which are in increasingly short supply in countries around the world.

Construction of refrigerated warehouses is rising but may not be enough to meet demand.

Take Australia’s acute situation. Globally, there is about 0.15 cubic metres of refrigerated warehousing space per urban resident. Australia has around half that, according to the Global Cold Chain Alliance.

The bulk of new space developed since 2018 has been concentrated mainly in North America, India and China. But even in the U.S. facilities are running at maximum capacity, according to JLL.

“Consumers are eating healthier and fresher food, opting for the convenience of buying it online,” says Michael Ignatiadis, head of supply chain and logistics solutions – APAC, JLL “Combine this with a rising middle class in Asia, which is eating out more and shopping in modern supermarkets, and growing urban populations, and you have a cluster of trends driving demand for cold storage.”

The demand is prompting developers to respond, resulting in a construction boom.

Cold storage construction is projected to reach US$18.6 billion in value by 2027 - an increase of 13.8 percent per year, according to consulting firm Emergen Research.

But even at this pace the space shortage is likely to persist given the demand for fresh food, Ignatiadis says.

In the U.S., online grocery purchases as a proportion of the overall grocery market are forecast to more than double by 2025 to 21.5 percent, according to a study by grocery ecommerce specialist Mercatus and research firm Incisiv. In Asia Pacific, research company Forrester expects online grocery services to grow by 30 percent each year up to 2024, doubling its share of the online market to 10.6 percent.

However, the ability to accommodate this growth is challenged by an inadequate end-to-end cold chain solution, says Michael Ignatiadis, head of supply chain and logistics solutions – APAC, JLL.

“Take Vietnam’s seafood export sector, the third largest in the world, which uses a major part of the cold storage space. During the peak of the pandemic 30 to 50 percent of seafood export orders were cancelled leading to inventories pilling up and cold storage facilities reaching their maximum capacity. With a cold supply chain that is highly fragmented and run mostly by small-medium providers, cold storage is a big opportunity for sophisticated operators,” he says.

JLL is a leading professional services firm that specializes in real estate and investment management. JLL shapes the future of real estate for a better world by using the most advanced technology to create rewarding opportunities, amazing spaces and sustainable real estate solutions for our clients, our people and our communities. JLL is a Fortune 500 company with annual revenue of $18.0 billion, operations in over 80 countries and a global workforce of more than 94,000 as of March 31, 2020. JLL is the brand name, and a registered trademark, of Jones Lang LaSalle Incorporated. For further information, visit jll.com.

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