As a result of changing preferences of the American consumer, the quickening pace of scientific discoveries, and the commercialization of cures and treatments, America has run out of room in the refrigerator.
Prior to COVID-19, U.S. cold storage was in short supply. Nationally, the segment has a historically low vacancy rate of 10%. Given consumer preferences for fresh foods over canned or packaged foods, demand from grocers and food delivery companies has spiked significantly. Bespoke’s own analysis of the market for cold storage space in the greater Los Angeles area, for example, shows that a large percentage of the existing cold storage space is inefficient and functionally obsolete. Given the current demand for 40 ft. clear cold storage space in the greater Los Angeles area, the current realistic vacancy rate is below 7%.
Adding additional supplies to accommodate the expansion of cold storage facilities is much more difficult and time-consuming than simply building another warehouse. As a specialty asset, development costs are much higher than for traditional warehouse space, in some cases more than double. Cold storage requires careful planning with respect to cooling requirements and temperature zones for several types of items, such as fresh foods and dairy products. Another challenge is the added necessity for abundant and reliable electric power and accessibility to major highways, ports, and cargo airports. Finally, proximity to USDA and FDA compliance and enforcement offices is a highly desirable — but hard to secure — feature. Cold storage facilities require long planning horizons and are much higher-risk investments for traditional developers.
In order to meet this demand, Bespoke has teamed with several large investment funds to identify prospective tenants, and manage and ultimately develop cold storage facilities on a custom, or “bespoke,” basis. Already we have identified several major food and beverage tenants who are interested in securing long-term cold storage space in key markets across the U.S.
We at Bespoke are excited to lend our expertise to help shape long-term solutions to these evolving challenges and will be sure to share any findings along the way. If you are looking for support in the industry, we are happy to jump in and apply our past experience and current learnings.