Speculative Cold Storage Projects Set To Recover As Demand Grows

While current cold storage supply exceeds demand, built-to-suit projects are leading most construction activity.

However, as existing inventory is leased out and the demand for modern, multi-zoned, and convertible temperature-controlled facilities increases, speculative cold storage projects are expected to recover, according to a report from Colliers.

The global cold storage market is projected to grow to $427 billion by 2030, representing an 18.1% compound annual growth rate (CAGR) from its current value of $159.7 billion. The growth is driven by emerging trends such as health-conscious consumers seeking frozen foods with gut-friendly ingredients, rising interest in restaurant-quality meals for home dining, and the growing popularity of global flavors.

Additionally, evolving food safety regulations, energy efficiency concerns, and advancements in automation are pushing the demand for modern cold storage solutions. The average cold storage facility is nearly 40 years old, prompting developers and investors to reassess their strategies, creating a significant moment of change for the industry.

Speculative cold storage (SCS) development surged during the pandemic, expanding by 5.8 million square feet between 2020 and 2023, driven by low interest rates, strong rent growth, and increasing consumer demand. However, in mid-2023, rising interest rates and inflation caused the market to slow, with net absorption falling, vacancy rates climbing, and rent growth slowing.

In 2024, only five SCS projects were completed, totaling 1.1 million square feet. Colliers predicts that 2.2 million square feet of SCS space will be completed in 2025, including a 392,000-square-foot facility in Plainfield, Illinois, for Chill’s and a 137,000-square-foot project in Long Island, New York, for BGO.

Historically, SCS development has been concentrated in markets with lower land costs, fewer zoning restrictions, and good access to power. However, Colliers notes a growing demand for modern facilities near major population centers. Developers are increasingly looking at tertiary markets with business-friendly environments and easier approvals, or at intermodal ports like Cold Summit II in Lancaster, Texas.

Some developers are also exploring the possibility of building vertically to maximize space in premium markets. While this approach is gaining traction in the UK, it remains uncertain whether it will catch on in the U.S.

Colliers also highlighted that macroeconomic factors will continue to influence SCS development, including policies related to tariffs, labor taxes, and infrastructure spending. Investments in infrastructure could increase construction costs, while higher tariffs may result in retaliatory measures that could dampen exports and reduce demand.

Source: GlobeSt