Driven by the growth of online grocery sales, increased pharmaceutical needs and updates to facilities, the demand for cold storage space continues. Existing cold storage tenants feel the need to transform their buildings into more efficient spaces to keep up with consumer needs.
Despite the fact that there was 3.3 million sq. ft. of speculative development of cold storage space under construction in Q2 2022, the U.S. is still faced with overwhelming demand and minimal available space. The vacancy currently sits around 3.5% with this asset class making up just over 1% of the total U.S. industrial market (totaling approximately 251 million sq. ft.). As we consider demand forecasts, there seems to be no end in sight for the capacity constraints. The global cold storage market is expected to expand at a compound annual growth rate of 13.4% from 2022 to 2030.
Demand for new developments is high due to the outdated nature of current cold storage space. The average age of existing infrastructure is 34 years with 50% of the existing infrastructure built over 30 years ago. These facilities are not nearly as flexible as newer developments, and tenants are increasingly looking for less rigid space layouts. In order to adapt to consumers’ changing habits, companies need the ability to switch seamlessly between frozen and chilled refrigerated spaces. Technology capabilities are also attractive components of newer developments as machine learning and AI are improving quality control techniques and mobile racking is becoming more accessible for cold storage use.
While attention on cold storage most recently centered around the pandemic and the need for more effective vaccine distribution, demand in this industry is still primarily fueled by grocery delivery. Online sales are expected to rise to 21.5% of total U.S. grocery sales by 2025 and grocers are now balancing their fulfillment needs with in-store picking and centralized fulfillment. Consumers are more conscious of their food options, which has led to an increase in vertical farming. These efforts provide locally grown food in urban areas and have played a part in increased speculative cold storage development.
As food trends rapidly change and speed-to-market becomes essential, the Kansas City region is one of the largest and fastest growing food and beverage logistics hubs in the United States. Located in the heart of the country’s agricultural region, KC is one of the best places for food and beverage production, ingredient manufacturing, cold storage and other food related supply chain activities. Learn more about the food and beverage industry in Kansas City.
Read more about the future of cold storage:
“Cold Storage Pipeline Grew to 3.3M SF in Q2,” Globest, July 2022
“As Consumers Take a Step Back from Home Deliveries, Will Cold Storage Remain a Hot Asset Type?” Wealth Management, June 2022
“Five ways cold storage is keeping pace with modern life,” JLL, June 2021
“Cold Storage Demand Grows Amid Tailwinds,” CBRE, June 2022