Expansion of Cold Chain is Driving Industrial Growth

With cold storage warehouse space in the US jammed to capacity from coast to coast, the pace of temperature-controlled industrial warehouse acquisitions, expansions and new facilities will accelerate in 2022. 

The demand for freezer space at cold storage warehouses may soon exceed their capacity as US consumers who have gotten used to purchasing groceries online during the pandemic continue to stuff their refrigerators with frozen food.

A 70-percent increase in the cost of shipping perishable goods in refrigerated trucks also is intensifying the demand for last-mile cold chain facilities across the country. The per-mile rate for refrigerated trucks hit $4.97 this month, up from a rate of $2.93 in 2020, before the supply-chain crunch developed during the pandemic.

Lineage Logistics, the largest temperature-controlled industrial REIT, recently announced that it has added $1.7 billion in new equity from its strategic partners, the latest tranche in a $6-billion equity pool the REIT has raised since the beginning of 2020.

Lineage operates more than 1.6 billion cubic feet of temperature-controlled storage space in North America. In August, Lineage acquired Hanson Logistics’ cold-storage distribution network, which includes more than 46 million cubic feet of temperature-controlled warehouse space in Michigan and Indiana.

According to FoodLogistics, which tracks the food supply chain, 90 percent of third-party logistics providers (3PL) are planning to expand their cold storage capacity in the coming months. Large 3PLs also have increased the pace of their acquisition of cold storage warehouses.

Cold-chain 3PL RLS Logistics, which expects to add 20 new network partners and development projects this year, is focused on acquiring family-owned cold storage providers and keeping the previous owners on board to manage the cold-storage space.

While 3PL providers scramble to expand their freezer and refrigerated dock space, leading industrial warehouse investors are snapping up deals to add more cold storage properties to their portfolios.

Orange County, CA-based Provender Partners, which has acquired more than 2 million SF of warehouse space since the beginning of 2021, this month acquired two Class A cold storage warehouses totaling 316,000 square feet in Londonderry, NH in a $67-million transaction.

The Londonderry Freezer Warehouse and Highwood Cold Storage facilities, which are leased to a company called ReallyCold, offer a combined 138,000 SF of -100 below freezer space and more than 24,000 SF of refrigerated dock space, as well as freezers that can chill to -200.

“While there is tremendous demand, there is virtually no available freezer space in the Northeast US,” said Provender CEO and founder Neil Johnson. “The 32,000 pallet positions between these two Londonderry cold storage properties made this purchase a prime opportunity to tap into the critical food supply chain in a region that serves more than 87 million people, all located within a single day’s truck drive.”

Provender, with a growing industrial portfolio of nearly 7 million SF, last year expanded its geographic footprint by making its first investments in Alabama, Iowa, Nevada, New Jersey and Utah.

United States Cold Storage, the third-largest cold storage provider with 381 million cubic feet of temperature-controlled space, continues to grow its US warehouse assets.

US Cold Storage, which has 42 refrigerated, chill and ambient storage and distribution facilities across the US, has announced that it will soon break ground for a new 3.8-million-cubic-foot food warehouse on 39 acres adjacent to its existing ware in Tulare, CA.

The $31-million warehouse, which will include new freezer space and refrigerated docks when it opens at the end of this year, will increase capacity at US Cold Storage’s Tulare facilities to 51 million lbs. of food products, food ingredients and packaging materials, with an annual throughput of 246 million lbs.

US Cold Storage said in a release that the Tulare project has been in the planning states for several months, but it had been delayed several times due to “the extremely high cost of [building] materials.”