Cold storage sites in California are often situated near major ports such as Los Angeles, Long Beach, and Oakland, serving as vital hubs for both imports and exports.

Compared to the overall industrial space, cold storage remains a niche (less than 2% of industrial real estate). However, the sector is vital and growing, with national revenues projected to reach $9 billion in 2025, according to IBISWorld.

BLT Enterprises' portfolio includes several properties serving the cold storage market, including two in Los Angeles that are currently leased to a leading provider of cold storage supply chain solutions.

Rob Solomon, president of BLT Enterprises, told GlobeSt.com that several key factors drive the demand seen in California, including its agricultural output. The Golden State is the top U.S. producer of fruits, vegetables and dairy.

The second factor is California’s size; it is the top state in the U.S. by population, with nearly 40 million residents, and its dense metro areas, including Los Angeles and the San Francisco Bay Area, create intense demand for last-mile distribution.

“This population feeds directly into the pandemic and post-pandemic rise of e-grocery and direct-to-consumer shopping trends,” Solomon said.

In the US, overall online grocery sales are projected to account for 21.5% of all grocery sales in 2025 and are growing at 11.7% CAGR through 2027. This rapid growth necessitates the expansion of urban cold storage to support same-day and next-day delivery logistics, according to Solomon.

Other factors driving growth include a robust pharmaceutical sector, which often requires advanced cold storage solutions, particularly for temperature-sensitive biologics, vaccines and gene therapies, as well as new California state ESG and sustainability goals.

“California's regulatory environment is pushing operators to develop more energy-efficient and automated cold storage facilities,” Solomon said. “With a substantial portion of existing cold storage over 40 years old, this creates demand for new builds that meet ESG standards, such as low-emission refrigeration and solar-powered energy systems.”

While many cold storage assets serve local/regional markets, especially in food distribution and retail, others—particularly those near ports, such as in Los Angeles—support national and international trade, including the import and export of fresh and frozen produce and meat.

Temp-Controlled Storage Expensive to Build

Temperature-controlled storage is more expensive to build and operate than traditional industrial properties, according to Solomon.

“However, as a long-term investor in cold storage facilities, we believe the extra cost is justified,” he said.

Per square foot, rents for new cold storage facilities in California range from $16 to $25 annually, with rates reaching up to $28 to $32 in top markets, such as Los Angeles.

“Current capital costs remain high, and financing is often arranged through build-to-suit leases or long-term commitments,” Solomon explained.

“Operational expenses, particularly energy costs, are also significant, leading to the widespread adoption of energy management systems and green infrastructure. Industry estimates for new construction range from $250 to $350 per square foot, depending on the complexity of the build and its refrigeration requirements.”

Solomon said cap rates range from mid-5% to low 6% with IRR in the low to mid-teens. Rent growth and expansion are targeted sources of income growth.

“Another key metric to note is that the property’s height also accounts for a considerable component of both its cost and revenue potential,” he said. “Because the entire facility will be cooled, the occupier will want to use the whole space efficiently, making cubic feet a highly relevant metric.”

Cold Storage Construction at a Suitable Pace

Cold storage market construction in California is happening at just the right pace, according to Solomon.

“It’s fast enough to meet growing demand, but not so fast that it depresses values,” he said. “During the late period of low interest rates from 2020 to 2023, the market overall experienced a surge in new construction. That surge has slowed, but as of mid-2025, approximately 3.4 million square feet of speculative cold storage is under construction nationwide, according to Colliers.

“With California accounting for 25% to 30% of national development, we estimate that 850,000 to 1,000,000 square feet are currently under construction, with expected 2025 deliveries ranging from 550,000 to 700,000 square feet. Additional construction from existing developers will increase this number.”

Solomon said that the cold storage market expansion will continue into 2026 and beyond.

“It is being fueled by continued growth in online grocery/last mile delivery services, life sciences and the biotech/pharma sector, as well as the need to replace aging infrastructure, with 60% of U.S. cold warehouses built before 1990,” he said.

According to various sources, national cold storage deliveries are expected to increase from 2.2 million square feet in 2025 to 2.5 to 3 million square feet in 2026. California’s portion is forecasted to increase to 650,000 to 750,000 square feet, with speculative and build-to-suit activity in port-adjacent regions and logistics corridors.

Independent and Major Operators Split Development

The development market is split between independent developers and major operators, including REITs like Lineage Logistics and Americold, the two largest players in the U.S., with Lineage holding a 31% market share and Americold holding 23%.

These companies are quickly expanding through both acquisitions and new developments built by developers. Lineage has substantial resources for both, having completed a major IPO in 2024 that raised $4.4 billion.

Most investors interested in cold storage, such as BLT, have strong relationships with logistics providers like Lineage and other tenants seeking temperature-controlled space.

“Building, owning, and maintaining these facilities incurs high costs, making it essential to quickly lease them to reliable, stable tenants,” Solomon said. “The current rise in demand for these assets is helpful, but because of the capital expenditure involved, cold storage is best managed by developers and investors experienced in this specific asset class.

In recent history, during a period of heightened speculative development between 2020 and 2023, independent developers delivered 5.8 million square feet of speculative space nationally.

In California this year, an estimated 55% of development (500,000 square feet) is undertaken by independents, and 45% (400,000 square feet) is executed by major players, including build-to-suit and regional expansions. M&A activity remains high, as large players seek to scale up their deployment of automation and energy upgrades more efficiently.