click to call

What Factors are Driving the Demand for Cold Storage Facilities?

The newest rapidly evolving market in commercial real estate is cold storage. The recent demand for cold storage facilities has been driven by several factors including changes in consumer behavior, technological advancements, and broader economic trends. Below are primary factors contributing to this demand:

Growth in E-commerce & Online Grocery Shopping

Increased Consumer Demand: The rise of e-commerce, particularly during and after the pandemic, has led to increased demand for online grocery shopping and home delivery of perishable goods. This has necessitated more cold storage facilities to handle the storage and distribution of these products.

Direct-to-Consumer Models: Companies are increasingly adopting direct-to-consumer models for fresh and frozen foods, requiring more cold storage space to manage inventory and ensure timely delivery.

Expansion of the Pharmaceutical & Biotechnology Sectors

Vaccine Storage: The development and distribution of vaccines, including those requiring ultra-low temperature storage, have significantly increased the need for specialized cold storage facilities.

Biopharmaceuticals: The growth of the biopharmaceutical sector, which often requires temperature-controlled environments for storage and transportation, is also contributing to the demand.

Food Industry Trends

Shift Towards Fresh and Organic Foods: There is a growing consumer preference for fresh, organic, and minimally processed foods, which require refrigerated storage to maintain quality and safety.

Global Supply Chains: Increasing globalization of the food supply chain means more products are being imported and exported, necessitating extensive cold storage infrastructure to manage these perishable goods.

Technological Advancements

Improved Refrigeration Technology: Advances in refrigeration and cold chain technology have made cold storage more efficient and cost-effective, encouraging investment in these facilities.

Automation: The integration of automation and data analytics in cold storage facilities enhances operational efficiency, inventory management, and energy usage, making these facilities more attractive investments.

Newer buildings can leverage technological advancements to increase clear height, enhance energy efficiency, and improve overall operations, making them more attractive for businesses.

Urbanization & Changing Consumer Lifestyles

Urban Population Growth: Increasing urbanization leads to higher demand for perishable goods in densely populated areas, driving the need for strategically located cold storage facilities.

Convenience Foods: Busy lifestyles and the preference for convenient, ready-to-eat, and frozen meals have boosted the demand for cold storage to store these products.

Regulatory Requirements & Food Safety

Stricter Regulations: Enhanced regulations regarding food safety and storage conditions are pushing businesses to invest in state-of-the-art cold storage facilities to comply with standards and avoid penalties.

Traceability and Transparency: Increased focus on food traceability and transparency requires robust cold chain logistics, driving demand for sophisticated cold storage solutions.

Supply Chain Resilience

Risk Mitigation: The pandemic highlighted vulnerabilities in global supply chains, leading companies to invest in cold storage to build more resilient and localized supply chains.

Inventory Management: To avoid disruptions, businesses are maintaining higher inventory levels of perishable goods, necessitating additional cold storage capacity.

Investment & Market Trends & Aging Buildings

Real Estate Investment: Cold storage facilities are becoming a lucrative asset class within commercial real estate, attracting significant investment from real estate developers and private equity firms.

High Returns: The unique and essential nature of cold storage facilities often leads to higher rental yields and long-term leases, making them attractive to investors.

Aging Buildings: The average age of cold storage facilities in the U.S. is over 40 years old, leading to a supply-demand imbalance, low vacancy rates, and the need for replacement due to inefficiency or building code advancements/ structural necessities. In addition to new building code enhancements, buildings structural integrity come into play after 40years.

Seismic retrofits provide an important value-added improvement to buildings. A retrofitted structure is worth more because its timespan has been extended, based on its ability to withstand a major earthquake or seismic activity. In addition, the marketability is enhanced with retrofitted structures increasing the market value.  They are more sought after by tenants because they are safer and better able to withstand the force of our region’s frequent quakes. Therefore, with the driving demand of cold storage facilities it is imperative to invest in the structural integrity of buildings to adapt to the ever-changing market trends.

 

The increasing demand for cold storage facilities is a multi-faceted trend. As industries continue to evolve and adapt to new market demands, the need for efficient, reliable, and advanced cold storage solutions is expected to grow, making this sector a critical component of the commercial real estate landscape.

Interested in protecting your commercial real estate asset investments, contact us https://saundersseismic.com/contact/

Posted Under: Commercial & Industrial Real Estate