The cold storage sector, once a niche corner of the commercial real estate (CRE) market, is now attracting significant attention from investors. The July initial public offering (IPO) of Lineage, a major player in cold storage, was the largest of the year, signaling the sector’s rising importance. The growing demand for modern cold storage facilities is driven by the need to address aging infrastructure, shifts in the global supply chain, and the increasing challenges posed by climate change.
Anthony Rinaldi, Founder and Managing Principal at Saxum Real Estate, highlighted the impact of the COVID-19 pandemic on the industry during the 2024 National Cold Storage Summit. "What Covid did was throw a massive spotlight on the need for better-working supply chains across the globe, especially in the need for new cold storage facilities," Rinaldi said. This demand has attracted substantial capital investment, with developers and investors eager to capitalize on the growing need for state-of-the-art cold storage solutions.
Currently, the U.S. has just under 73 million square feet of cold storage space, with a remarkably low vacancy rate of 3.4%, compared to the national average of 6.4% for industrial assets, according to a report from Colliers. The aging of existing facilities—many of which are decades old—has created a significant gap in the market, driving the need for new, modern facilities.
Mark Moore, President of CMC Design Build, noted that the realization of this market gap came even before the pandemic. "In 2019, we began to see the increasing demand for cold storage, driven by changes in the food supply chain and the rise of last-mile delivery," Moore explained. The average age of industrial buildings is between 40 and 43 years, but for cold storage, it's around 31 years. This aging infrastructure, coupled with the evolving needs of cold storage users, has prompted a shift in how companies approach their cold storage requirements.
Josh Lewis, Chief Operating Officer of RL Cold, echoed the sentiment, emphasizing that many existing cold storage facilities no longer meet modern supply chain needs. "Brand-new, world-class, state-of-the-art buildings are what's needed today," Lewis stated. Despite ongoing efforts to address the demand, the current supply of cold storage facilities still falls short of market needs.
While retrofitting older facilities might seem like a viable solution, the reality is more complex. Moore pointed out that older buildings often fail to meet modern requirements for clear height, energy efficiency, and other critical specifications. "Even if you get a nice, clean, dry box, it doesn't pencil out," Moore said. "Try to retrofit an old freezer building, and you're not going to change the clear height, which is crucial."
Developers, however, remain cautious about speculative building in the cold storage sector. The pandemic spurred a surge in warehouse demand, but in the post-pandemic period, both demand and rents have softened. As a result, many developers prefer to focus on build-to-suit projects rather than speculative ventures.
Despite these challenges, the future of the cold storage sector looks promising. The knowledge base among investors, lenders, and developers has grown significantly in recent years, especially following Lineage’s successful IPO. Jonathan Epstein, Managing Partner at BGO, noted that this increased understanding has paved the way for more confident investments in the sector. "Having another public company, particularly one of Lineage’s size, gives a lot of confidence to that market," Epstein said. This confidence is expected to drive further development and investment in cold storage facilities, positioning the sector for continued growth in the coming years.
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