Online grocery and take out to slow: Potential industrial impacts
Few times in recent history have world or national events shifted day-to-day life the way COVID-19 has. In the span of a few days in March 2020, people emptied grocery shelves and many dine-in restaurants closed their doors as everyone went into quarantine. Food delivery and take out already had a meaningful foothold in our lives, but not what they would quickly become.
Restaurant supply chain to surge backThis sudden shift was not easily met by suppliers, at first. Remember the toilet paper rationing? It did not take long, however, for the supply chain to adjust. By the summer of 2020, most grocery and food suppliers had restored inventory, but the surge in online grocery and takeout eating remained, as limits on in-person capacity continued.
This trend was evidenced in US Census data, as Year Over Year Monthly Grocery Sales averaged a 10% increase in 2020 over 2019. Conversely, restaurant sales averaged a 12% decline over the same period.
Many experts believe that Amazon grocery, Uber Eats and the like are here to stay and will ultimately displace the traditional in-person model for food procurement. However, as vaccination rates increase across the country, states are already aggressively relaxing in-person limits, with many completely removing them and their stay-at-home protocols. Whether this is due to politics and/or COVID Fatigue, people seem to be eager to return to life as it was before the pandemic.
Restaurants that are willing to open for dine-in service are packed (as much as they can be). Spring Break travel is surging. Summer appears to be ripe for large numbers of people to be on the move. Presuming this trend continues and is not derailed by new COVID variants running rampant, I would argue that the supply chain around online grocery will need to re-adjust to be closer to the pre-COVID model. People will want to go to markets and pick out their own meat and produce again.
Further, the restaurant industry will rebound, and the restaurant supply chain will grow, as hotels and dine-in restaurants greet guests in pre-COVID numbers. The ingredients are all there: economic growth, pent-up demand, and a need to socialize again (not over Zoom).
How will this shift affect industrial real estate?My prediction is slowing growth for large cold storage space, less last mile distribution and more demand from the hotel/restaurant supply industry. We can already see some numbers supporting this in states like Florida and Texas. For example, cold storage demand from the end of 2020 and the start of 2021 is down substantially from the Summer/Fall 2020 pandemic levels for pork, chicken, and turkey according to the USDA.
However, real estate developers are still betting on the effects of COVID. The US Census reports that cold storage construction spending is up 5.8% in January 2021, versus the prior year. A subset of this additional cold storage construction is a small, but growing, trend of market-specific speculative cold storage development.
I am sure many will say that the “return to normal” in grocery shopping and dining out is some sort of short-term claw back from COVID. Maybe they are right, but I believe that what we have all endured has left long-term scars. Our desire to be with people, out of the house, and experience the many things we took for granted pre-COVID will become a lasting appreciation for many.
Blake St.Onge talks with Kristen Zervis, VP of Talent & Culture for LegitScript, a Portland-based technology company that helps organizations of all sizes help keep their services legal and safe online. Kristen has first-hand experience of what it is like to start a new job during the pandemic as she began her role at LegitScript in August of 2020. Kristen shares how her experience has shaped the onboarding process the LegitScript team has implemented, and why building trust with employees is so important for the workplace of the future.
Your monthly update on the North Dallas/Plano/Frisco office market.
On this week’s podcast, Jackie Dunckley, SVP and Chief Talent Officer at OnPoint Community Credit Union shares her unique work history experience, including employment litigation and working in several industries including newspapers, biotech, and financial services. She brings tremendous value to leadership and serves as a real advocate for employees, all the while continuing to influence those around her with her community involvement.