The cold storage industry is experiencing growth due to increased demand from COVID-19 vaccinations and consumer preference for convenience foods.
Cold storage has long been a niche segment of industrial. CommercialEdge tracks 900 facilities nationwide, compared to 152,000 total industrial properties. Rapidly mushrooming need for space has produced some development, with the 8.1 million square feet of cold storage space currently under construction expected to add 1.6% to total stock, according to CommercialEdge. Nearly 20% of the new development is concentrated in the Inland Empire, where 1.5 million square feet are under construction. The largest project totals 1 million square feet at San Manuel Landing.
Evolving demographic and social trends are likely to keep demand for cold storage high for the foreseeable future. Demand is being driven by consumers, particularly the growth in convenience foods and take-out meals. Nearly half of Americans surveyed by OnePoll on behalf of Home Chef say they are too busy to cook or would prefer to spend time doing other things. COVID-19 is another factor driving demand for cold storage. The Pfizer and Moderna COVID-19 vaccinations must be kept in frozen storage units that are negative 158 degrees Fahrenheit (colder than the winters in Antarctica, according to NPR) for the vaccinations to be effective.
Refrigerated storage has become an integral part of the supply chain when it comes to transporting and storing temperature-sensitive products. Cold storage offers two options: chilled or frozen. The frozen market sector is more profitable than its chilled counterpart. Cold storage operators are looking to cut a few costs by investing in CO2/NH3 cascade refrigeration systems, which are easier to maintain than the current ammonia systems, according to JLL. Operators are also investing heavily in energy-efficiency solutions to reduce operating costs.
The increasing ubiquity of cold storage has spurred demand from investors, who expect strong rent growth. Cold storage properties accounted for $2 billion in sales volume in 2021, trading at an average price of $157 per foot, according to CommercialEdge.
The market capitalization of U.S. cold storage in 2021 was about $42 billion, which is 35% of the global market, according to Grand View Research. The research firm expects the segment to grow at a compound annual growth rate (CAGR) of 13.4% from 2022 to 2030.