In the interim to locating sufficient spaces in markets where demand is surging, grocery delivery companies are restructuring their supply chain, turning some brick-and-mortar stores into dark online-only shopping centers or partnering with existing brick-and-mortar stores to get fulfill orders.

Already, US cold storage was in short supply. Nationally, the industrial segment has a historically low vacancy of 10%. Adding more supply isn't as easy as development warehouse space. This is a specialty asset, and it costs twice as much as warehouse space to develop. A cold storage or freezer facility costs $130 to $180 per square foot to develop, while a traditional warehouse space only costs $70 to $90 per square foot to develop. These costs are the highest in the Western Region and Northeast Region, where there are more dense population centers. Southwest cold storage construction, on the other hand, is the most affordable in the country.

Generally, cold storage users want new construction assets rather than warehouse-conversion projects. Temperature-controlled properties require pallet capacity, which maximizes vertical racking. To convert an existing warehouse into a cold storage space, there is a loss of ceiling height that limits vertical racking, making these properties less efficient. With more demand for fresh produce and organic ingredients, grocery delivery services and need efficient spaces with the capacity to serve large population centers.

While speculative construction was challenging in the past, the increased demand for these spaces has made cold storage a possibility. Currently, more than 78% of the current cold storage stock was built before 2000, and much of it is considered obsolete or inefficient. Today, cold storage tenants need 40-to-50-foot ceiling heights and maximum space for stacking and racking products. These features generally come with new development properties.