COVID-19 has made the commercial real estate sector teeter in the last few months. On one hand, the market saw a sudden plunge in the need for office spaces. At the same time, it also seems to be the biggest beneficiary of the pandemic. With the surge in online shopping during the lockdown, one industrial space that has seen a massive growth is cold stores, along with the other warehousing requirements.

What began as mere need of the hour is now steering the wheels. The convenience and comfort of ordering fresh fruits and vegetables on just one tap has ultimately become a behavioral trait owing to the circumstances and a mental block to handpicking the produce in crowded areas.

Major players such as Big Basket, Grofers and Milkbasket are particularly tending to the grocery needs of the customers within a promising delivery time-frame. Hence, online grocery sales are expected to increase over the next six years, and resultingly, shift demand for cold storage from retail space to industrial space in warehouses and distribution centres. According to a report by NABCOMS, India currently has a total cold storage capacity of 226.7 lakh ton, as against the required capacity of 350 lakh ton it will need in the near future. However, the increase in the grocery delivery sales will drive demand for cold storage, fulfilment spaces and freight and 3PL companies. More specifically, most of these platforms rely on an asset-light model with fulfilment centres and are now looking to occupy cold storage facilities that are close to populated cities to meet shallow delivery timelines.

Building new cold storage warehouses may not be an easy undertaking. Although, new construction is always preferable but the demand is here now and the construction will take at least some time. Not to undermine the humongous funds and the time required for a more sophisticated technology for these warehouses. Meanwhile, The solution at hand is buying up old warehouses and upgrading them to meet today’s demands.

There is no denying the fact that the cold storage is now heating up the real estate sector and this market could witness imbalance if supply doesn’t rise quickly enough to meet demand.