The hot business of cold storage

If you had to identify a specific type of real estate that has seen its value increase because of changing consumer eating habits, global demographic shifts, worldwide pandemic preparedness, and US export policy — while its importance to reducing global carbon emissions and adapting to climate change rise in tandem — refrigerated warehouses may not be your first pick.

But there’s a strong case to be made that the expansion and evolution of the cold-storage industry — often called the “cold chain” — will play a significant role in energy, environmental, and economic news in the 21st century. Cold storage facilities aren’t fun places to visit; some are kept so frigid, at minus 50 degrees Fahrenheit, that the workers who toil in these windowless spaces rotate in 15-minute shifts, despite their heavy protective gear. 

But refrigerated warehouses are great to build and own. Investors and developers expect 8 to 10% annual growth in this specialized real estate, according to Adam Thocher, SVP of Global Programs and Insights at the Global Cold Chain Alliance (GCCA). That’s made it a profitable real-estate niche. 

“When I think of our business at its most germane, it’s food infrastructure,” said Jonathan Epstein, managing partner of BGO (formerly BentallGreenOak), a global real-estate investment firm that develops and operates these spaces. “And because of the nature of changing supply chains, there’s not enough of it, especially in the developing world, and what’s there is old.”

The ability to more easily cool and freeze food for storage, preparation, and distribution has revolutionized grocery shelves, home cooking, and restaurants for decades, and will continue to do so for years because it taps into every trend all at once. Growing fast-casual restaurant chains, last-mile delivery, a surging global middle class seeking more protein, and the explosion in healthy, organic produce and industrialized frozen food, all need cold storage. 

Take grapes, Epstein said. What was once a seasonal fruit now finds itself available year-round, thanks to a network of cold-storage spaces that save and distribute rotating seasonal yields from Chile to Central America, then Mexico, and finally California.

“Everybody talks about fresh food at the grocery store — bullshit,” he said. “That fish was on board a boat in Alaska and was flash-frozen on the spot. It just seems to be fresh.”

The pandemic accelerated these trends, spiking frozen-food sales in the US to over $74 billion in 2023, a $10 billion increase in just three years, and leading to a wave of refrigerator purchases by Chinese consumers. The need to refrigerate Covid vaccines underscored how important these sites are to global health. Even Ozempic and similar blockbuster anti-obesity drugs need to be stored at 46 degrees F. And the rest of the world is increasingly asking why, if you can always get a Granny Smith apple in New York, can't you get one in Beijing or London?

“Where sentiment in the United States goes, the rest of the world will eventually follow,” Thocher said. “If it happens here, it’ll happen somewhere else. And that requires infrastructure to support it.”

The GCCA estimates there is at least 7.4 billion cubic feet of cold storage worldwide, and 3.7 billion in the US alone, but that’s a vast understatement, Thocher said. The alliance only looks at partial data from 92 countries (not including China) and governments tend to be cagey about sharing his kind of data because of economic and food-security concerns, since these sites are crucial parts of food infrastructure and can reveal levels of economic activity.

Despite the surfeit of subzero space, the cold-storage real-estate market in the US continues to flourish, centered on ports, rail hubs like Kansas City, growing Sun Belt cities, and centers of food processing, like the wide swaths of factory farms in the Southeast. Real-estate firm Colliers predicts 13% annual growth through 2030, and Cory Singer, VP of business development at FCL Builders, which specializes in cold-storage construction, expects an average of 10 million square feet of new construction every year for the next decade. 

The web of frozen spaces storing and transporting our groceries has changed our experience of food. Singer said that ever since the port of Jacksonville, Florida, ramped up produce intake a few years ago, taking deliveries via the Panama Canal and Caribbean, you can now find green bananas in Southern grocery stores, a rarity when the fruit was typically shipped from West Coast ports overland by train through Chicago years ago. 

Dominated by a handful of big owners and operators — including Americold Industries and Lineage Logistics, who together corner roughly 70% of the market — the industry has state-of-the-art facilities that can run $350 a square foot to build, four times the national average for warehouse space. Another significant room-temperature real-estate player, Related, which traditionally focuses on commercial spaces and housing, launched a $1 billion affiliate business, RealCold, last fall. In March 2023, Newmark estimated there were 9.8 million square feet of new cold storage under construction in the US. 

There’s even expansive demand for new space to store the incredible amount of beef, pork, and chicken industrialized US agriculture sends around the world (we grow a quarter of the world’s poultry). The GCCA has recently been lobbying for the Fortifying Refrigeration Infrastructure and Developing Global Exports Act, or FRIDGE Act, which would give the US Department of Agriculture funds to help train staff and build out cold-storage capacity in emerging markets.

Overseas, however, even more developers hasten for refrigeration. India, partly because of rising living standards, has seen a big increase in cold-storage development, Thocher said. The nearshoring wave — the post-supply-chain slip-up shift to bring manufacturing back from overseas in or near the US — includes additional investment in warehouses at or near both sides of the US-Mexican border. Specialized refrigerated containers, or reefers, for produce like avocados have helped the fruit’s popularity skyrocket.

But the biggest opportunity may be in Africa, which has a growing young population, subpar subzero infrastructure, and a new African Continental Free Trade Agreement strengthening trade routes. Thocher says that as much as there’s potential to send food and medicine to Africa via an expansion of the cold chain, it’s a two-way street; better infrastructure can help African agriculture find its place on the world market.

Developing countries also see cold storage as a key hedge against food waste and coming scarcity related to the climate crisis. With rising temperatures and changing weather patterns impacting crop yields, the ability to store food longer and reduce spoilage will become essential to feeding everyone. 

Take Rwanda, where Toby Peters, an engineer in sustainable energy storage and professor of the cold economy at the UK’s Birmingham Energy Institute, has expanded the cold chain. According to a 2020 World Bank study, about 40% of the food produced in the country is lost along the supply chain, in large part because of spoilage. That translates to 21% of the country’s land use, 16% of its greenhouse-gas emissions, and a 12% loss to Rwanda’s annual GDP. 

Food security has become a global challenge with a growing population, Peters said, especially since roughly 30% of global food production is lost, making increasing supply and reducing food waste imperative. That’s extremely tricky when the critical loss of arable land and desertification, due to climate change, strengthens the case for cold-storage warehouses, which, because of their vast energy use, contribute to that very problem. A 2023 Columbia University study found the sector responsible for 3.5% of total global emissions. The cold-storage industry has responded with more energy-efficient designs and less harmful ammonia-based refrigerants, but it adds an additional challenge to efforts to ramp up sustainable energy production. 

“This is a real system-level challenge, a wicked problem,” Peters said. “My exam question is, how do we feed 9 billion people while economically empowering 400 million small farmers, all without using diesel?”

Patrick Sisson is a reporter covering cities, technology, and business.