Cold storage has performed consistently well during times of financial hardship. The recession of 2009 saw food & beverage/F&B 3PL revenues fall by just one-tenth of 1% compared to revenues for the third-party logistics/3PL sector, which were down nearly 7% in aggregate. F&B has been the third-best performing retail sector during the past two recessions, with a 3.7% month-over-month growth rate against a decline of 6.1% for total retail sales. Moreover, while retail as a whole has experienced an 8.7% decline overall during the pandemic, F&B sales have seen 25.6% growth for March 2020.

Does this mean a new industrial asset class is forming? According to a report from Savills, in the words of the Magic 8-Ball, "signs point to yes."

Publicly listed grocery chains have shown remarkable resilience during the pandemic. Stock prices for some of the largest grocers have increased by an average of 12% from the end of 2019 through April 15, 2020, which was approximately one month into the shutdowns. Amazon stock saw 25% growth during that period, reported Savills, while regional grocer Kroger's saw a 10% increase over the same period. The grocery sector is one of the main consumers of cold storage space, providing investors with increasing assurance that demand will hold steady or rise, regardless of difficult times.

Among the top investors in and consumers of multi-temperature cold storage facilities are third-party logistics companies. Of the top ten 3PL companies (ranked by revenue), six have cold storage logistics facilities in their portfolios. Companies with cold storage facilities in their portfolios outperformed those companies without such facilities by 16% by the end of 2019, according to Savills. Additionally, value in those companies remains 6% higher on average through April 15, 2020.

Another indicator of a new asset class formation is underbuilding in the sector. Online grocery sales have fueled the demand for more cold storage warehousing space in both the U.S. and Canada. Because of the cost and the complexity involved in constructing temperature-controlled storage facilities, developers are not building enough to meet that demand. Several factors enter into that delay, including specifications that vary on a user-by-user basis. These specifications encompass power, water, wastewater and other infrastructure requirements relative to traditional ambient warehousing. The ever-evolving regulatory atmosphere also affects various industries differently. It's the lack of uniformly adopted provisions that tends to drive up pricing.

Still, progress is noticeable. Bridge Development Partners LLC and PGIM Real Estate recently bought a 20-acre site in Hialeah, Fla., where they plan to build a cold storage facility called Bridge Point Cold Logistics Center. The 312,103-square-foot facility is being built as a speculative development without a tenant lined up. In a news release, Bridge Development senior vice president for cold storage Brian Niven said demand for climate-controlled cold storage space "is at an all-time high across the region, thanks in part to shifting consumer preferences towards fast, fresh products and online grocery deliveries."

Instant Insights /

Multi-Temperature Cold Storage Facilities: A New Asset Class on the Horizon

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