Expect Long-Term Demand for Cold Storage Along Southern Coast

There appears to be a mismatch of physical and locational cold storage spaces based on tenants’ e-commerce needs, according to a new report on the sector from Marcus & Millichap. New cold storage projects have been somewhat infrequent, with fewer than 18 million square feet of cold storage space being delivered since 2019.

“This dynamic is poignant in states like Florida and North Carolina, where population growth has recently surged to record levels,” according to the report. “Rather, much of the nation’s existing stock is in California, Texas and New York, where cold storage facilities have historically supported the import and export of food.”

Exports as a share of US food production and imports as a share of food consumption were at record highs in 2022, at 20.6 and 17.5 percent, respectively.

Philadelphia and New York ports continue to host much of this activity, due to the dense, expansive populations residing nearby.

Recent Mexico-favoring trade agreements and Sun Belt migration trends are bringing more shipments to Southern ports such as Port Everglades, Savannah, and Houston. Such changes underpin long-term demand for cold storage along the southern coast, according to Marcus & Millichap.

Cold storage demand is expected to follow where populations and food consumption are fast-growing. “Sites located near residential hubs will be especially coveted, reducing lead times for companies storing and transporting food,” according to the report.

A great deal of households migrated to the Sun Belt and Mountain regions in recent years, shifting US food consumption patterns. Six Sun Belt markets each welcomed more than 200,000 new transplants.

In turn, e-commerce capabilities in high-migration states like Texas and Florida saw robust tenant demand for back-end logistics space.

“With online grocery sales projected to increase over the long term, tenant demand for cold storage facilities should run parallel to this dynamic,” the report said.