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Thursday, July 9, 2020
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Real Deals: Retail, Cold Storage

RETAIL REPORT

CBRE has released the Dallas-Fort Worth Q1 Retail MarketView which saw leasing velocity take a dip reflecting the impact of the pandemic.  

DFW Q1 Retail Highlights

– After several quarters of strong leasing activity, DFW finally saw leasing velocity start to fall this quarter. In total, DFW saw 166,425 square feet of positive absorption this quarter, with smaller leases of 15,000 square feet and below driving positive absorption. Occupancy fell slightly to 94.2% as deliveries outpaced absorption with only 42% of new retail product leased at the end of the quarter.

– Small businesses are among the retailers most affected by the rapid spread of COVID-19. Nearly half of the private workforce in Texas is employed by a small business. Since the outbreak of coronavirus in the U.S. at the beginning of March, small businesses have seen revenue decline 15% to 80% and are coming to terms with how they will make ends meet in the months ahead.

– Assuming the coronavirus peaks this summer in the U.S. mirroring China’s experience, the U.S. government’s fiscal and monetary stimulus will begin to bear fruit. This will be paired with pent-up private demand that could help the U.S. economy return to growth by year-end and drive stronger than previously expected growth in 2021.

COLD STORAGE

The COVID-19 pandemic is creating massive disruption in the food industry, which will result in increased demand for industrial cold storage space in the U.S., according to a new CBRE report.

 As many consumers shelter in place, online grocery sales have increased dramatically.

CBRE Research explored the relationship between e-commerce grocery growth and cold storage warehouse capacity in its Food on Demand Series: Cold Storage Logistics Unpacked, suggesting that an additional 75 to 100 million square feet of industrial freezer/cooler space will be needed to meet the demand generated by online grocery sales in the next five years.

The COVID-19 pandemic will likely accelerate this need for space, creating five long-term impacts for the cold-storage sector.

Some notes from the report:

– E-commerce grocery will become more widely adopted as consumer comfort grows with the practice. This will trigger the aforementioned heightened demand for cold storage capacity.

Public refrigerated warehouse companies will likely consolidate to gain more control of the cold storage footprint.

– Since e-commerce is typically fulfilled by local grocery stores, retail footprints will include more storage and fulfillment space, including a greater need for infill temperature-controlled facilities in proximity to consumers.

– Restaurants may see a significant shift in dining formats with less dine-in options and more delivery or take-out that would require cold storage capacity. Foodservice companies that supply restaurants may look to second-generation cold storage space as a cost advantage in a limited dining environment.

– Automation will increase, prompting higher-density, greater-height and smaller-footprint buildouts that will be required for around-the-clock operations.

“Until recently, consumers were not ordering a lot of perishables online, but that will likely change in a post-COVID-19 environment,” said Matthew Walaszek, associate director of Industrial and Logistics research for CBRE. “Now, we are seeing consumers trend toward buying foods online such as frozen meats and poultry. To meet this new demand, we will need more temperature-controlled space.”