The rollout of coronavirus vaccines has given a lot of people hope that the pandemic is starting to wrap up. But two of the three vaccine candidates available domestically -- Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA) -- are unique in that they require cold storage. As such, the demand for cold storage facilities has increased, which has been a boon to industrial REITs, or real estate investment trusts, and the people who invest in them.
But that's not the only reason cold storage is exploding. Another consumer trend has created a scenario where these facilities are now even more in demand.
E-commerce has expanded to groceries
For years, consumers have increasingly shifted to online shopping for the convenience and, in some cases, savings involved. And that's extended to groceries.
Though online grocery shopping really gained traction during the pandemic, consumers were ordering groceries online even before the coronavirus outbreak began. Services like Amazon's (NASDAQ: AMZN) Amazon Fresh, as well as Fresh Direct, for example, provided a convenient alternative to visiting the supermarket and exceptional value to consumers without access to vehicles.
But once the pandemic began, online grocery shopping really began to surge. Early in the outbreak, many consumers shifted to online food shopping when the act of entering a supermarket began to mean waiting in a long line outdoors due to local capacity limits. And even once those restrictions eased up, many consumers felt safer pointing and clicking their way to their food items of choice and having them delivered or picking them up curbside.
All this has sparked a need for temperature-regulated food-storage warehouses -- facilities that can safely store dairy products, meat, produce, and other perishable items. And now, REITs like Americold Realty Trust (NYSE: COLD) are in the process of building or preparing to build out massive facilities to meet this demand.
In fact, globally, cold storage construction is expected to grow to $18.6 billion in 2027 compared to $7 billion in 2019, according to consulting firm Emergen Research. And that means real estate investors may want to focus on REITs with cold storage centers in their portfolios.
Of course, it's easy to argue that once the pandemic wraps up, consumers will revert back to in-store food shopping. But while that may hold true for some, now that consumers have gotten used to buying groceries online, many may uphold that habit, even once the aforementioned safety concerns subside. For consumers without a car, mobility issues, childcare constraints, or even busy work schedules, online grocery shopping offers a world of benefits. And there's a good chance it will remain popular even once the pandemic is a thing of the past.
Let's also not forget it's still unclear as to whether coronavirus vaccine boosters will become an ongoing requirement. If so, that too will lend to added cold storage demand.
The Millionacres bottom line
All told, it's a good time to invest in industrial REITs. Many retailers are increasingly shuttering stores, shifting their focus to digital sales, and investing in warehouse space. And within that realm, cold storage has the potential to truly explode over the next half-decade or longer.