All that online grocery shopping is causing a cold-storage shortage

VERNON, Calif. — Deep in a warehouse just south of Los Angeles, barrels of frozen mango puree from Mexico are stacked four stories high. Hams for Christmas are flash-frozen as June temperatures climb outside.

Inside this dimly lit chamber of the Lineage Logistics warehouse, it is 10 degrees below zero — cold enough to stop a ballpoint pen from rolling out ink and to send an ominous chill through the soles of visitors’ shoes.

Lineage is the biggest player in the country’s cold-storage industry, a business consumers seldom see but one that plays a crucial role in keeping edible fare fresh from the time it’s harvested until it reaches the kitchen fridge.

Now, changes in the way people shop have the “cold chain” scrambling to keep up. Consumers, particularly younger buyers, are turning more and more to online grocery shopping and prepared meal services, which means more refrigerated warehouses are needed to keep that stuff cold.

To keep pace, the country will need 100 million square feet of new cold-storage warehouse space over the next five years, according to a report by real estate brokerage CBRE.

It’s a particularly hot corner in the mushrooming warehouse business, fed by demand from and other e-commerce operations, which have been growing at lightning speed. Last month, investment manager Blackstone Group said it would pay $18.7 billion to buy a network of U.S. industrial warehouses from Singapore-based GLP, reported to be the largest private real estate transaction in history.

The ports of Los Angeles and Long Beach, the nation’s biggest container-port complex, have more than doubled their refrigerated-container capacity in recent years to address increasing import and export demand for fresh- and frozen-food products including meat, pork, poultry and animal feed, CBRE said.

Demand for cold storage is also being elevated by consumers’ growing aversion to chemical food preservatives. Refrigeration is a highly effective food preservative that can keep crops such as apples fresh-tasting for months without chemicals by slowing ripening and decay.

“Now, even hamburger buns need delivery through the cold chain,” said Spencer Levy, chairman of Americas research for CBRE. “You are seeing an increase there as demand for nonpreservative food rises.”

One of the country’s largest agricultural regions is California’s Central Valley, where the cold chain starts in the field when heat-sensitive crops such as raspberries and cherries are quickly chilled in cold water or through other techniques before being transported in refrigerated trucks to cold storage facilities.

Online grocery shopping is still in its infancy compared with other retail categories, suggesting there is room for it to grow. Just 3% of U.S. grocery spending occurs online, while 20% of footwear and 40% of electronics spending occurs online.

The desire for online shopping is accelerating for both prepared meals and groceries, said Art Rasmussen, a CBRE broker who specializes in cold-storage-facility sales and leases.

Source: Seattle Times

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