Can the Cold Storage Market Heat Up Again?

By Peter Lamas, MAI

Cold storage is a distinctive commercial real estate asset class because its value is closely tied not only to the underlying real estate, but also to the logistics operations it supports.

Having appraised hundreds of cold storage and food processing facilities across the country, I have seen the industry evolve from conventional facilities with 36-foot clear heights to highly automated buildings exceeding 140 feet. Most newly developed facilities now range from approximately 50 to 70 feet in height, although some extend well beyond 100 feet.

Because of the asset class’s specialized nature and the limited availability of comparable market data, credible analysis requires a deep understanding of both real estate and cold-chain logistics. NVC leverages its industry relationships and specialized experience to provide clients with timely market analysis and well-supported appraisal reports for cold storage and food processing properties.

Newer, owner-occupied cold storage facilities are often located in rural markets near food producers and processing plants. Other facilities are located in major metropolitan areas, where proximity to transportation networks and end users is critical. The sector became especially attractive during the COVID-19 pandemic, when demand increased for food distribution space and temperature-controlled medical storage.

As institutional capital and investor interest accelerated, however, development activity eventually began to outpace tenant demand. At the same time, construction costs rose, creating pressure for higher lease rates. With demand moderating in some markets, speculative projects have faced longer lease-up periods and elevated vacancy.

What Happened—and Where Is the Market Heading?

A few weeks ago, I attended the CREDA I.Con Cold Storage Conference in Dallas, where I reconnected with industry contacts and heard panel discussions on the current state of the sector, Wall Street’s view of cold storage, new builds versus retrofits, and the unique challenges associated with cold storage development.

Following are several of the conference’s key takeaways.

• Cold storage properties typically carry more operating risk than traditional warehouse facilities because their performance depends heavily on logistics operations. Labor costs, food-production conditions, energy expenses, and changes in consumer preferences can all affect an operator’s performance.

• Major owner-operators—including Lineage, Americold, Agile, and others—operate as logistics businesses in addition to owning or leasing real estate. They receive products, store them, and distribute them to end users. This model differs from many conventional warehouses, which may store an owner’s inventory or goods for a range of users.

• Tariffs, inflation, labor costs, and energy costs can all increase operating expenses for cold storage operators. While these factors may not directly determine real estate value, they can affect an operating company’s profitability and the feasibility of a facility or development.

• Supply continues to outpace demand in portions of the market. That said, several industry participants reported that transaction activity in 2026 has improved relative to the prior two years, even though the overall market remains relatively slow.

• GLP-1 medications may influence long-term food demand and consumption patterns. While lower overall food consumption could be a concern for the industry, increased demand for protein-rich and other refrigerated food products could support demand for temperature-controlled storage relative to dry-food storage.

• The average cold storage facility is estimated to be about 40 years old. New construction reportedly has represented only about 15 percent of the existing asset base over the past five years. As older facilities approach the end of their economic or functional lives, demand for newer and more efficient facilities could increase.

• Obsolete cold storage facilities may be suitable for adaptive reuse, including conversion to studios, data centers, or other specialized uses, depending on the building’s location, physical characteristics, and utility infrastructure.

• Some industry analysts estimate that the market currently has approximately 10 percent excess supply. The timeline for absorption remains uncertain and will likely vary by market, building quality, and location.

• Merger-and-acquisition activity has slowed in the cold storage industry. However, capital remains interested in the sector, and acquisition activity could increase as more attractive opportunities emerge. Investors are generally unwilling to overpay simply to establish a position in the market.

• Cold storage REITs are often valued using EBITDA multiples, with conference participants citing a typical range of approximately 12x to 16x EBITDA. In some cases, roughly 75 percent of enterprise value may be attributable to real estate and 25 percent to the operating platform, although the allocation can vary considerably by company and circumstances.

• Geopolitical uncertainty, tariffs, and rising input costs continue to affect the broader food-processing industry, including packaging, fertilizer, transportation, and imported food products.

• Developers are generally focused on build-to-suit projects rather than speculative construction until existing speculative space is absorbed. Several participants suggested that this could take 12 to 24 months—or longer.

• The pace of lease-up remains uncertain. Landlords may need to reduce asking rents or offer greater concessions to compete for tenants, potentially affecting projected returns. In some cases, users may find that purchasing vacant facilities is more financially attractive than leasing space at current asking rents. Ultimately, location, building quality, and operating efficiency are likely to be key differentiators.

Bull and Bear Perspectives
The conference discussion reflected both optimism and caution.

The Bull Case
Those with a more positive outlook believe economic occupancy could improve in the near term, particularly if inflation moderates and demand for protein-focused food products continues to grow. They note that GLP-1 users may consume more protein and other temperature-sensitive foods, even if overall food consumption declines.

Optimists also see opportunities for cold storage operators to serve a broader range of users, including companies in candy, pet food, pharmaceutical, and other temperature-controlled product categories.

The Bear Case
Those with a more cautious outlook point to continued economic uncertainty. Rising costs can compress margins for food producers, processors, and logistics operators. A key question is whether companies can pass higher costs through to consumers and restore historic margins.

There is also uncertainty around the long-term impact of GLP-1 medications. If consumers eat less overall, the resulting reduction in food volume could weaken demand for temperature-controlled space. The degree to which increased protein consumption offsets that trend remains to be seen.

Second Generation or Build-to-Suit?
The choice between second-generation cold storage space and build-to-suit facilities is another important consideration. Second-generation space can often be delivered more quickly, but users may need to accept compromises such as lower clear heights, less efficient layouts, or “box-in-a-box” construction. Build-to-suit facilities can better meet a user’s operational requirements but generally require a longer-term commitment.

At present, a 15-year lease term is often viewed as a minimum for build-to-suit cold storage development. Without that level of commitment, developers may be reluctant to begin new projects before the current inventory of vacant space is absorbed.

When Will Cold Storage Turn “Hot” Again?
Based on current market conditions and feedback from industry participants, it will likely take at least 12 to 24 months—and potentially longer—to absorb the existing supply of vacant speculative space. Once that occurs, speculative development may gradually resume.

The timing will also depend on broader economic conditions, including interest rates, inflation, construction costs, and food-sector demand. A more favorable interest-rate and inflation environment could improve project feasibility, strengthen tenant demand, and support renewed investment in the sector.

Cold storage remains a specialized and essential component of the food and pharmaceutical supply chain. While the near-term outlook is tempered by excess supply and operating uncertainty, the sector’s aging inventory, evolving consumer demand, and need for more efficient facilities may create meaningful long-term opportunities.

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