CBRE has undertaken a survey to assess the impact of COVID-19 on the cold storage sector. This was completed by operators active in the sector, the purpose of which has been to identify the impact of the pandemic and how the industry has reacted.

Impact on demand

Whilst the majority of Europe has been in a state of lockdown, in many countries cold storage businesses are still open as the sector is classified as essential. As countries witnessed consumers panic buying food products and an increase in online food retail, this was inevitably going to affect the food supply chain. This appears to have positively impacted the cold storage sector as 100% of respondents agreed that they have witnessed an increase in demand for pallet space in their facilities as a result of the pandemic. Indeed, respondents noted this to be symptomatic of a shortage of available cold storage space in countries such as the UK.

Impact on supply chain

Despite food producers increasing production to meet demand, just over 50% of operators have had more pressure from customers to process goods through facilities more quickly. However, close to 80% found there to have been delays to the supply chain. Operators noted this owed to a slowdown in the transportation of goods across the world, as well as various protocols adopted such as social distancing meaning that goods are being processed slower through facilities.

Impact on EBITDA

Over 50% of operators responded that the pandemic has positively affected EBITDA. Respondents noted that high demand for space has resulted in increased utilisation and thereby allowed operators to maximise revenue. Indeed, one operator noted that whilst throughput has reduced, utilisation has increased thereby providing the opportunity to maximise storage revenue.

The outlook

In terms of outlook, 0% respondents forecasted revenues to be negatively affected over the next 3-9 months. Likewise, all respondents agreed there will be no change to any expansion / acquisition strategies. A number of operators answered that they plan to continue growing their business in new markets, as well as expanding relationships with existing customers to meet changing consumer and retailer demand.

Summary

There are some potential headwinds that should be considered, such as reduced short term consumer demand for certain products, ice cream being one example and possible reduction in throughput, impacting certain revenue streams. Nevertheless, from the survey it is evident that the sector has been resilient, but moreover this highlights the strong underlying fundamentals as a key component in the food supply chain. We expect continued investor interest in to the sector as it provides robust returns and growth opportunities.

CBRE will shortly be releasing an extensive research report on the Cold Storage sector. For further information contact Charles or Dominic on the details provided. Finally to learn about the cold storage sector around the world read Cold Storage Logistics Unpacked from the US and Asia Pacific Cold Storage: An Investor's Guide”.