Cold storage supply currently outpaces demand, and built-to-suit opportunities are driving most construction projects, but as existing inventory is leased and demand grows for modern convertible and multi-zoned temperature facilities, speculative cold storage projects will likely rebound, according to a Colliers report.
The overall cold storage market is expected to reach a value of $427 billion by 2030, an 18.1% compound annual growth rate (CAGR) from its current global value of $159.7 billion, according to Colliers. The market benefits from several emerging trends including health-conscious consumers driving demand for frozen foods with gut-friendly ingredients, increasing interest in restaurant-quality meals for dining at home and the growing popularity of global flavors.
In addition, changing food safety regulations, energy efficiency concerns and advances in automation are driving the need for modern cold storage solutions. The average cold storage facility is nearly 40 years old, and Colliers said developers and investors are reassessing their strategies, which is creating a pivotal moment for the cold storage industry.
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Speculative cold storage (SCS) development boomed during the pandemic, growing by 5.8 million square feet between 2020 and 2023 fueled by historically low interest rates, strong rent and cap rates, and surging consumer demand. However, rising interest rates and the inflationary environment of mid-2023 caused the market to contract, with net absorption declining, vacancy rates rising and rent growth slowing.
Only five SCS projects were completed last year, totaling 1.1 million square feet. Colliers said 2.2 million square feet of SCS space is expected to be completed in 2025. These projects include a 392,000-square-foot facility in Plainfield, Illinois, for Chill’s and a 137,000-square-foot project for BGO in Long Island, New York.
Historically, SCS development has been concentrated in markets with lower land costs, fewer zoning restrictions and sufficient access to power. Colliers noted, however, that demand is rising for modern facilities near major population centers. Developers are looking toward tertiary markets with business-friendly environments and easy approvals, or intermodal ports like Cold Summit II in Lancaster, Texas, said the firm.
Developers are also exploring the idea of maximizing space in premium markets by building vertically. This approach is catching on in the United Kingdom but it remains to be seen if it will expand in the United States.
Colliers said macroeconomic factors will continue to shape SCS development, including policies on tariffs, labor taxes and infrastructure spending. Infrastructure investments could drive up construction costs, while higher tariffs could trigger retaliatory measures that could dampen exports and demand.
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Kristen Smithberg
Kristen Smithberg is a Colorado-based freelance writer who covers commercial real estate, insurance, benefits and retirement topics for BenefitsPRO and other industry publications.
