If you’re in the food manufacturing business, you’ve probably been hearing a lot about cold storage over the last few years. It’s not just a trend. Cold storage is rapidly becoming a critical component of the industrial real estate landscape. The pandemic has only accelerated this shift, highlighting the essential role of temperature-controlled facilities in our supply chains.
Market Trends and Statistics
Let’s kick things off with some numbers. In Q3 2023, we saw a whopping 6.5 million square feet of cold storage space under construction. That’s massive for a niche sector! But here’s the kicker: even with all that development, cold storage still makes up only 1.7% of the entire industrial market. Translation? There’s a whole lot of room for growth.
Drivers of Cold Storage Demand
So, what’s fueling this demand? First off, food safety has taken center stage. Companies need facilities closer to production to ensure their products remain fresh and safe. Then there’s the diversification of supply chains. Remember the early days of the pandemic when grocery shelves were empty? Manufacturers are now hedging their bets, ensuring they have robust, diversified supply chains to prevent that kind of disruption again.
6.5M
And let’s not forget the e-commerce boom. Online grocery shopping has exploded, and guess what? All that produce, dairy, and meat needs a place to chill before it hits your doorstep.
Typical Cold Storage Facility Characteristics
Now, let’s talk about what these facilities actually look like. Cold storage facilities typically range from 175,000 to 300,000 square feet. Some are highly automated, boasting state-of-the-art systems, while others stick to more traditional setups. It’s a mix and match, depending on the company’s needs.
Location is everything. These facilities need to be close to major transportation hubs—highways, railways, ports—you name it. And power? They’re not energy hogs like some might think, but they do require a consistent and affordable power supply. After all, keeping things cold 24/7 isn’t cheap.
Cold storage is rapidly becoming a critical component of the industrial real estate landscape.
Challenges in Cold Storage Development
Developing cold storage isn’t a walk in the park. The costs can be sky-high, especially with the specialized refrigeration and insulation systems needed. Zoning and planning regulations can also throw a wrench in the works. High-bay facilities, which maximize vertical space, often face height restrictions that can slow down or even halt development.
Take a project we had in the Southeast. Everything was lined up perfectly—location, logistics, demand—but the electric rate in the given location was significantly higher than in other locations. It made the project financially unviable in that market. That’s a prime example of how crucial it is to secure a manageable power supply early in the process.
Success Stories and Notable Projects
But it’s not all doom and gloom. There are plenty of success stories out there. Agile Cold Storage made a $46 million investment in Pearl River, Louisiana, creating 100 new jobs. This wasn’t just a win for the company but also a huge boost for the local economy. Another great example is a 245,000-square-foot port-centric temperature-controlled facility in Suffolk, Virginia.
The pandemic has only accelerated this shift, highlighting the essential role of temperature-controlled facilities in our supply chains.
These projects highlight the importance of public-private partnerships and leveraging incentives. Local governments are starting to see the value in attracting cold storage investments and are offering attractive incentive packages to get these projects off the ground.
Future Outlook and Opportunities
Looking ahead, the future of cold storage in industrial real estate is bright. We’re starting to see growth in secondary markets as developers hunt for new opportunities. Innovations in cold storage technology are also on the horizon, promising more efficient insulation and refrigeration systems that could lower operating costs and make these facilities even more attractive investments.
Cold storage isn’t just a niche market; it’s a strategic investment that can enhance your supply chain’s efficiency and resilience.
$46M
Practical Advice for Executives
So, what should you do if you’re considering diving into the cold storage pool? Here are a few tips:
- Evaluate Potential Sites Carefully: Look for locations with easy access to major transportation routes and a reliable power supply.
- Partner with Experienced Developers: Cold storage is a specialized field. Working with developers who have a track record in this area can save you a lot of headaches.
- Leverage Public Incentives: Many local governments offer incentives for cold storage projects. Do your homework and see what’s available.
- Integrate Cold Storage into Existing Supply Chains: For manufacturing entities, think about how these facilities can complement your current operations. The goal is to enhance efficiency, not create logistical nightmares.
Cold storage is quickly becoming a cornerstone of the industrial real estate market. The demand is there, the technology is advancing, and the opportunities for growth are abundant. It’s not just about keeping things cold; it’s about keeping your business on the cutting edge.
