Investors Are Warming Up to Cold Storage Investment

Investors are warming up to cold storage asset investment, and as a result, cap rates are pushing closer to that of high-quality warehouses, according to a report from CBRE. Los Angeles is one of the top markets for cold storage, with a 4% vacancy rate, among the lowest in the country. As a result of the opportunities in the market, cold storage has seen an influx of new capital and investors.

“The draw of strong demographics driving food sales, food safety demands putting additional focus on the cold chain and scarcity of available cold storage inventory due to the lack of speculative development has made investors more comfortable with cold storage investment,” Art Rasmussen, SVP at CBRE, tells GlobeSt.com. “Wall Street is warming up to investment in the food sector, reducing the perceived risk premium and tightening of cap rates.”

The low availability of cold storage in Los Angeles is not surprising, considering that there is a lack of supply in most industrial categories in the market. “Due to the overall high cost of construction and lack of speculative building, there are very few alternative in the market for new or growing food companies,” says Rasmussen. “Until recently, buildings were developed mainly for owner users, and now, with e-commerce in play there is a much higher demand from emerging food users as well as prepared foods brands -more than ever before.”