How Cold Storage Demand is Changing the Commercial Real Estate Market

Real Estate Today Contributor

The commercial real estate market is witnessing a transformative shift, driven by the surging demand for cold storage facilities. As e-commerce reshapes consumer behavior and industries evolve, the need for specialized spaces to store perishable goods has never been more critical. Here’s a closer look at the key factors fueling this trend and its implications for the real estate sector.

The Rise of Cold Storage Needs

Cold storage facilities are temperature-controlled environments essential for preserving perishable items like food, pharmaceuticals, and flowers. Several factors are driving the demand for these spaces:

E-commerce and Grocery Delivery
The boom in online grocery shopping, accelerated by the pandemic, has significantly increased the need for cold storage. Companies like Amazon Fresh and Instacart require vast networks of refrigerated warehouses to ensure timely delivery of fresh and frozen goods.
Pharmaceutical Advancements
The pharmaceutical industry, particularly with the distribution of temperature-sensitive products like vaccines and biologics, has become a major player in the cold storage market. COVID-19 vaccines highlighted the critical need for ultracold storage capabilities.
Supply Chain Evolution
Global supply chains are becoming more sophisticated, requiring efficient cold storage at ports and distribution centers. The globalization of food trade and consumer demand for year-round fresh produce are driving this expansion.

Impact on the Commercial Real Estate Market

Increased Investment in Cold Storage Facilities
Cold storage is emerging as one of the lucrative sectors in commercial real estate. Investors such as Dov Hertz, a commercial real estate developer from NYC and president of DH Property Holdings, have noted that cold storage offers significant opportunity in the future, alongside the repurposing of traditional warehouses and building state-of-the-art facilities from the ground up. Dov Hertz says: “The demand for cold storage in the greater New York City market and along the East Coast has increased and will continue to increase in coming years.”
Rising Property Values
Properties equipped for cold storage are commanding premium prices. This is due to the specialized infrastructure required, such as advanced refrigeration systems, high-insulation materials, and robust temperature-monitoring technologies.
New Development Trends
Developers are increasingly focusing on designing multipurpose facilities that combine cold and ambient storage to accommodate diverse tenant needs. Urban infill projects are also becoming popular as companies aim to position cold storage closer to major population centers to enhance delivery speed.
Technology Integration
Smart technology is playing a crucial role in modern cold storage facilities. IoT-enabled temperature sensors, AI-driven inventory management, and automation are now standard features, driving both efficiency and tenant interest.

Challenges in Cold Storage Real Estate

Despite its potential, the cold storage market is not without challenges. The high construction and maintenance costs of these facilities can deter some investors. Additionally, finding suitable locations close to urban centers, while adhering to zoning regulations and environmental standards, remains a hurdle.

Future Outlook

The cold storage boom shows no signs of slowing. According to industry forecasts, the global cold storage market is expected to grow at a compound annual growth rate (CAGR) of over 13% through 2030. With rising consumer expectations for convenience and fresh goods, along with advancements in supply chain logistics, demand for cold storage facilities will continue to reshape the commercial real estate landscape.

Dov Hertz said: “The increasing demand for cold storage is redefining the priorities of the commercial real estate sector. Developers, investors, and property managers are innovating to meet the needs of this expanding market, accommodating industries like food, pharmaceuticals, and e-commerce, which continue to grow.”

Published by: Nelly Chavez