Cold storage a red-hot sector
Interest in facilities grows as Americans continue stocking their freezers in the pandemic
Americans have treated their freezers a bit like security blankets over the past year, stuffing them full of staples and indulgences, a consumer behavior pattern that has had ripple effects beyond their kitchens.
Developers that focus on cold-storage facilities say they are seeing growing interest from companies seeking to build, buy or invest in the sector, despite construction costs that are roughly triple that of an ordinary warehouse.
Americold, a logistics company focused on the cold-storage supply chain, reported that its revenue grew 11.4% in 2020 from the previous year.
“We gave guidance pre-COVID for our 2020 year, and we’re one of the few companies that didn’t lift or change that guidance,” said Fred Boehler, CEO of Americold, which added 46 facilities to its portfolio through a $1.74 billion acquisition of Agro Merchants Group last year. “What we eat and where we eat will change, but we’re going to eat.”
Where we eat has shifted overwhelmingly to our own kitchens and living rooms, and what we eat increasingly comes from the freezer.
“People were very nervous not just about getting to a store, but what was going to happen with the supply chain,” said Jill Standish, global head of the retail practice at consulting firm Accenture. She added that a survey in March 2020, the month the World Health Organization declared the pandemic, found that about one-third of American shoppers were buying more frozen food than normal.
Even though the food-supply chain issues amid the early days of the pandemic have largely abated, Americans are still stocking up.
“Consumption of frozen or prepared meals was already on the rise leading into COVID,” said Beth Bloom, associate director of food and drink reports at the market research firm Mintel. The pandemic supercharged that trend, as restaurants shuttered and Americans stopped commuting to work and school.
The industry had to make large, rapid adjustments to accommodate these changes taking place across the country.
“This whole idea of food handling and cold storage in an e-commerce world is really different than it was in the past,” Standish said. “Instead of central locations of huge warehouses that have a long way to go to deliver, we’re seeing a lot of microfulfillment centers.”
Increasing demand for cold storage near where people live was rising before the pandemic. It accelerated when lockdown orders shut restaurants and food-service operations, and Americans who were
A worker inside Americold’s cold-storage facility in Atlanta. Developers that focus on cold-storage facilities say they are seeing growing interest from companies seeking to build, buy or invest in the sector even though construction costs are steeper.
stuck at home turned to online grocery shopping.
“The immediate change in consumer behavior due to COVID has caused companies to change how they service those demands,” said Art Rasmussen, a senior vice president at CBRE, a real estate investment and services firm.
Building cold-storage space can
cost $150 per square foot, about three times that of conventional warehouse space, so the “If you build it, they will come” development model used for other types of industrial real estate has not been financially feasible. Shovels go into the ground after tenants have committed and leases have been signed.