The global coronavirus pandemic has accelerated demand for infill logistics space and cold storage facilities, according to a recent report by Elion Partners, a Miami-based real estate investment and advisory firm.

With the logistics sector already strong at the onset of COVID-19 in March and the lockdowns that ensued to prevent the spread of the virus, the need for supply chain resiliency and accelerated demand for cold storage and infill logistics space, Elion stated in the report.

“The shift in consumer behavior toward e-commerce is expected to continue to advance in a post-pandemic world, making the current environment a secular trend instead of a real estate cycle,” the report states. “This ‘new normal’ has accelerated the urgency to build out resilient supply chains and increased demand for cold storage space through the surge in online grocery shoppers, bolstering the need for infill locations among an already active logistics real estate market.”

Commercial brokerage firm JLL recently predicted that the increased demand for logistics real estate could reach an additional 1 billion square feet by 2025.

E-commerce sales increased 104% in June 2020, generating $73.2 billion in online spending, compared to June 2019. Unable to meet the surge in demand, supply chains have been forced to accelerate their diversification strategies to mitigate what Elion states would be “future shock and volatility risk as well as increased inventory carry.”

Elion stressed in the report that the demand for regionalized distribution is not exclusive to just infill urban areas from occupiers and investors. Building greater supply chain resilience requires mitigating risk along the first, middle, and last mile of the distribution chain.

Elion advises that occupiers and investors should refocus their supply chain models and should look to reduce supply chain dependency through on-shoring and near-shoring.

The firm also notes that companies should consider port diversification strategies to avoid reliance on a single port in one region as well as multimodal transportation options close to parcel hubs to mitigate risks associated with trucking capacity constraints and increased freight costs.

“The pandemic highlighted the downside of just-in-time lean inventory principles evidenced by the rapid depletion of necessity inventories leaving supermarket shelves empty. Maintaining higher stock levels will generate more warehousing demand closer to consumption points and service locations, especially among companies engaged in the production and distribution of necessities,” the report stated.

Other recommendations include:

Adapting to the new retail landscape. Supply chains, particularly those linked to the food and beverage industry, may seek to leverage existing retail infrastructure to coordinate delivery and collection of goods near and around city centers.  In addition, investment in automation will be critical.

“Not only have inventory constraints contributed to e-commerce platforms unable to satisfy demand spikes but also labor shortages over the fear of the virus have compounded the issue. Flexible automation and robotics solutions can yield significant benefits to mitigating labor risks as well as enhance a company’s adherence to hygiene protocol,” Elion Partners notes.

Refocusing the traditional supply chain model to address these vulnerabilities has led to massive increases in infrastructure spending and modernization of existing logistics hubs, according to a recent report issued by CBRE.

In connection with the cold storage sector, due to the dramatic rise in online grocery and delivery services, cold storage in and near large population centers is projected to generate the highest demand for logistics real estate space, according to commercial brokerage firm CBRE. To meet the demand for groceries delivered directly to consumer homes (D2C) as well as those buying online and picking up in-store (BOPIS), an additional 75 million to 100 million square feet of cold storage space will be needed over the next five years.

Elion notes that the U.S. Department of Agriculture estimates that there is only 214 million square feet of existing industrial food commodity cold storage space in the U.S.

“The relatively small number of operators and specialized nature of the industry—barriers to entry such as high construction costs and restrictive government regulations regarding food-grade storage—have prevented overbuilding and limited new construction,” the report notes.

Since the onset of the coronavirus pandemic, Elion has continued to see demand for logistics real estate space from e-commerce and non-e-commerce tenants. “Benefitting from the secular tailwinds of the crisis, we project we’ll continue to see demand from investors for logistics real estate well into the future,” the report states.

Based on the latest CBRE estimates, annual net absorption for logistics real estate will total more than 333 million square feet by 2022, leading to annual rent growth of 5.7%.

Earlier this summer, VynZ Research issued a report that estimated the global cold chain market will be valued at $218 billion in 2020 and reach $320.2 billion by 2025. The global industrial refrigeration market is estimated to generate revenue of $19.2 billion in 2020 and is expected to reach $23.1 billion by 2025.

For access to the full Elion Partners report, go to: