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Industrial Real-Estate Developers Are Hot on Cold-Storage Warehouses

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Industrial real estate developers are confident that they are stepping up the construction of refrigerated warehouses in the United States and that pandemics will continue to change the way consumers buy groceries and meals without tenants lining up in space. increase.

Real estate reports show that by the second quarter of this year, about 3.3 million square feet of refrigerated warehouse space is under construction, with no plans for companies to occupy the site in advance, about more than the space built in 2019. It is 1,000% more.Service company

CBRE

Released on Wednesday.

The growth of what is known as speculative construction in real estate is Covid- as Americans buy groceries online and stock up on more frozen foods while supermarket chains and food suppliers are rebuilding their supply chains. To meet the demand following the drastic changes in consumer purchasing patterns during the 19-pandemic.

Private consumption has recently shifted again as shoppers return to the store. Cut into e-commerce salesAnd as rising inflation Impact on broader retail demand..

Every day, millions of sailors, truck drivers, cargo handling workers, warehouse workers, and delivery drivers bring tons of goods to stores and homes to meet consumer expectations for convenience. I’m continuing. But this complex commodity movement that underpins the global economy is far more vulnerable than many would imagine.Photo Illustration: Adele Morgan

“We are closely watching retail sales,” said Matthew Walaszek, CBRE’s head of research and one of the authors of the report. “If it falls, it affects the market and there is a setback in expansion, but we haven’t seen it yet.”

According to Walaszek, the refrigerated market is largely isolated from the slowdown because people have to keep eating, whether they buy food at a grocery store or sit at a restaurant.

Grocery sellers including

Walmart Ltd.

When

Kroger Ltd.

With a series of new logistics operations to meet online demand during a pandemic, many companies continue to invest in areas such as: Delivery and curve side pickup.. Kroger works with UK automated grocery fulfillment specialists

Ocado Group

Build a series of PLCs A distribution center full of robotics Reach e-commerce customers in the United States.

There are signs that demand for refrigerated products may be swaying. According to the online freight market DAT Solutions LLC, the spot rate for refrigerated trucks in May fell by nearly 10% compared to March.

Developers, brokers and other industry experts say there is room to provide more space to the market, especially in rapidly growing regions such as Texas, Arizona and Florida.

So far, about one-third of the 3.3 million square feet under development has been leased, Walaszek said. This is in line with what is common in the broader industrial markets of speculative projects.

Mark Duval, Managing Director of the Capital Markets of a Real Estate Investment Services Company

JLL,

Most of the US refrigerated warehouses are “inefficient and outdated,” he said, which also drives demand for new sites that can operate more efficiently.

Inside Winchill, a refrigerated warehouse in Sioux Falls, South Dakota


Photo:

Lauren Townsley / Associated Press

Due to the special demand for refrigerated warehouses, new developers are entering this sector. It is considered like a niche market in the industrial real estate market. According to a CBRE survey in April, about 40% of real estate investors are interested in refrigeration, up from 7% in 2019.

Thomas Eldridge, principal of RL Cold, based in Atlanta, a RealtyLink company, entered the field in 2020. “There is so much demand, which is very important,” he said. “It’s essential to our economy …. everyone has to eat. There’s no slowdown. If anything, it’s taken up.”

RL Cold is constructing three refrigerated buildings, approximately 300,000 square feet each, in Charleston, South Carolina, Baytown, Texas, and Wilmington, North Carolina. The project started without a line of tenants and has been leased since the start of work.

Eldridge said RL Cold plans to close three more refrigeration sites within the next 90 days, a sign of continued confidence in the sector.

Still, new projects are facing headwinds that are shaking much of the construction industry, including rising labor costs and material costs such as steel.

At Charleston, “I thought it would be a $ 60 million project, but it ended up being a $ 100 million project,” Eldridge said.

Write to Liz Young [email protected]

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