The COVID-19 pandemic caused a major shift in the way consumers purchase goods. While e-commerce was most certainly picking up before the pandemic, digital sales have soared over the past two years.
Within the realm of digital sales, one specific trend that's really taken off is an increase in online grocery purchases. This made sense during periods of high COVID-19 transmission rates from a health standpoint. But consumers are continuing to order groceries online, perhaps to capitalize on the convenience and time savings of not having to visit the supermarket in person.
But an uptick in online grocery sales is fueling the need for more space to store the items being ordered -- many of which can't simply sit on a regular shelf. And that's why now's a great time to consider investing in cold storage.
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An ongoing need
Demand for industrial space has soared tremendously since 2020. But now, we're starting to see notable demand for cold storage space to accommodate a rise in digital grocery sales.
That poses both a challenge and opportunity for the companies that operate and manage these spaces. On the one hand, it's great that such heavy demand exists. On the other, cold storage facilities are a lot more expensive to build and maintain than traditional warehouses. It's estimated that the typical cold storage facility will cost anywhere from $250 to $350 per square foot, compared to $100 per square foot for regular warehouse space.
But despite that cost, cold storage operators should be motivated to expand. As of February, the average national vacancy rate at cold storage facilities dropped from 4.7% to 3.8% over the previous 12 months. And as online grocery sales pick up, the need for more facilities is only apt to increase.
Get in while there's room for growth
Earlier on in the pandemic, the rollout of COVID-19 vaccines with strict refrigeration requirements seemed like a boon to cold storage. Now, an increase in online grocery sales makes an even greater case to build more of these units.
If you're looking to expand your real estate investing portfolio, you may want to look at cold storage REITs. And one specific REIT to look at is Americold Realty Trust (COLD -0.04%).
Americold is the first publicly traded REIT to focus on cold storage facilities. With nearly 250 facilities across the globe, it's a major power player in the cold storage space, as well as a REIT to keep on your radar if you're interested in capitalizing on what could be a very lucrative trend.
A new way to shop
It's no longer fear that's motivating consumers to purchase goods from their phones or laptops rather than go to the store. Retail REIT investors have been bemoaning the fact that physical stores have seen a notable decline in foot traffic over the past two years.
But while a boom in digital sales may be bad news for them, it could work to your advantage if you're willing to invest in industrial real estate agent. And given recent trends, cold storage really does have the potential to become the next big thing.
