Think Outside the Icebox
The need for cold storage space in apartment building lobbies
If you haven’t yet ordered food online, you’re starting to become a rare breed.
Last year, nearly 1 out of 2 American consumers ordered something they could eat online. As e-commerce continues charging forward, that’s supposed to rise to 7 in 10 by 2024.
In other words, grocery shopping through the web is on a fast-track to becoming the new normal.
But there’s a problem — and it’s waiting for savvy multifamily property owners to help solve.
Delivering groceries means delivering perishables, which need to be temperature-controlled or they’ll go bad. The problem is that there’s a significant shortage of direct-to-consumer-oriented cold storage space throughout the country, especially where most consumers are concentrated — large cities.
As our own research has found, there’s a significant premium for cold storage space. However, there hasn’t been much serious growth in new cold storage space since dairies built refrigerated warehouses in the 50s and 60s, back when nearly 30% of homes got their milk delivered.
Converting warehouse space to cold storage or developing new cold-storage facilities is prohibitively expensive for investors. The systems required to make an industrial building fully cold for freezer storage require immense capital expenditure.
And that’s where developers with creativity can enter — multifamily landlords can build their own smaller spaces that serve their buildings.
Think of re-imagining the mailroom or the traditional retail space in a mixed-use building for the 21st century. Apartment owners can help solve one of the biggest problems facing cold storage deliveries by creating their own temperature-controlled spaces on their ground or basement floors.
These second mailrooms would have flexible space to handle a wide variety of different shapes and sizes. That way, tenants can order ice cream by the gallon online and not have to worry about it melting if they don’t get a notification within five minutes of delivery.
A traditional retail space in a mixed-use multifamily building could also contribute cold storage to tenants.
The opportunity is much larger for multifamily owners who build cold storage space that’s large enough to hold more than their tenants will ever need, with enough capacity to store orders for the surrounding neighborhoods.
In other words, multifamily landlords who think big enough can lease out cold-storage space that e-commerce retailers — now in the grocery business — need but can’t find easily in the city. By doing so, they’re creating new nodes to service temperature-controlled orders from distribution centers, to smaller, fulfilment-oriented facilities with an urban-minded, direct-to-consumer operations focus.
It’s a way of fulfilling an important piece of their urban supply chain, offering tenants a new amenity and creating an alternate source of revenue for multifamily landlords. It is also means less spoiled food and less waste.
Peter Kroner is a Research Manager at JLL focused on investor and industrial research. He can be reached at peter.kroner@am.jll.com.
