Growing online grocery sales are boosting demand for cold storage warehouse space, but ramping up construction to meet that demand will be challenging, according to a report from CBRE. Obstacles include construction costs double or triple that of traditional warehouses, longer construction lead times, significantly higher clear heights and the complexity of maintaining multiple temperature zones within the same building.

CBRE Research estimates the cold storage vacancy rate is at around 4.3%, and in some markets where cold storage demand is at an all-time high, that rate is much lower. It notes cold storage occupiers rarely vacate their space unless they are scaling back their business or moving to a new facility.

The firm claims approximately 4.5 million-sq. ft. of new cold storage construction has been recently completed or is underway in the U.S., accounting for just 1.5% of the current industrial construction as of second quarter 2019. Projects currently in the pipeline include facilities for food producers and retail operators, as well as third-party public refrigerated warehouse companies like Americold and Lineage Logistics.

Cost is one of the major inhibitors to new cold storage construction, as costs per sq. ft. for a temperature-controlled facility can be as much as triple the cost of constructing a traditional warehouse. CBRE also notes the timeframe to build a cold storage warehouse is typically four to five months longer, given the higher complexity and building standards. In addition, construction costs tend to increase with lower temperature requirements and higher ceiling heights that increase the number of pallet positions.

CBRE expects to see three major shifts in the development and construction of cold storage facilities in years ahead: more speculative development; more development activity in small markets; and greater automation in the design and operation of cold storage facilities.

Recent developments in the cold storage industry have been tracked by The Food Institute, as well. Mattingly Cold Storage is slated to begin a 1.4 million-cu. ft. freezer expansion to enhance the diversity of its product line with current customers. In addition, Chacharone Properties opened the Armory Cold Storage warehouse in Worcester, MA, to complement Table Talk Pies' existing manufacturing and distribution facility.

Agriculture Capital invested in Firestone Pacific Foods to help the Washington-based frozen fruit processor expand processing and cold storage capacity, reported Portland Business Journal (Sept. 5). Meanwhile, Emergent Cold acquired New Orleans Cold Storage, its first acquisition in North America. Industry insiders estimate the deal to be worth about $200 million, reported NOLA.com (Sept. 4).