Cold Storage Demand Is At Its Peak and Growing

Cold storage demand is growing throughout the US. The market has already hit historic heights in the last year, and it is poised for continued growth. Currently, facilities are running at maximum capacity, and companies are looking to expand into emerging markets, like Utah.

“This growth is due to growing demand for pharmaceutical goods in countries such as China, Brazil and India,” Wick Udy, SVP of JLL’s Salt Lake City office. “This has caused U.S. pharmaceutical companies to rely on refrigerated storage facilities to store their goods before they are exported. Utah plays a key part in the transfer of consumer goods and raw materials throughout the United States. Three major interstates—I-15, I -80, and I-70—connect in the state and access in all directions and are readily available. Movement of consumer goods and raw materials is able to reach the west coast in a one-day to two-day delivery time.”

IWH Capital recently secured an $8.5 million loan for the acquisition of a 157,750-square-foot cold storage facility in Salt Lake City. The deal is exemplary of the current market demand. JLL capital markets senior director Christopher Knight and director Lucas Borges, along with senior managing director Mark Detmer and senior directors Robin Stolberg and Ryan Sitov represented the borrower in the deal. “We saw a strong appetite for this deal across various sources of capital looking to expand their allocations towards cold storage/industrial sector,” says Borges. “Lenders who expressed interest in this particular deal, include life insurance companies, CMBS and specialty finance lenders.”

The activity has also fueled lender appetite for cold storage deals. Ready Capital funded the Salt Lake City loan on behalf of IWH Capital. “Cold storage along with the entire industrial and logistics sector have become increasingly sought-after by the lending community given supply constraints faced across the country, especially during the pandemic,” adds Borges. “Refrigerated warehouse properties in particular, has seen increased demand due to a surge in grocery delivery services, especially properties within immediate access to the port, airport and highway infrastructure.”

The demand for cold storage surged during the pandemic, as consumers purchased perishable goods, especially groceries, online or for delivery. However, the market segment was already growing. The pandemic merely accelerated the trend. “The cold storage industry is expected to encounter transformed growth over the next three-five years,” says Udy. “This growth is supported by rebounding demand from secondary markets such as Utah and higher trade volumes as the effects of the COVID pandemic subside. Improving economic conditions will likely enable consumers to purchase a greater variety of food products from grocery stores and other retail channels, boosting demand for refrigerated storage.”