Private Equity – M&A Advisory

What we do know now is the expansion of cold storage is supported by the uniqueness of the frozen food industry in that it benefits from being rather inelastic as the demand for food remains steady regardless of economic conditions. For example, during the 2008 recession, restaurant visits dropped dramatically while demand for frozen food products increased. The steady demand through various economic cycles mitigates the potential risks to owning and operating cold storage facilities.

Demand for cold storage accelerated sharply after 2020, as pandemic-driven grocery e-commerce, expanded last-mile grocery delivery, and reshored pharmaceutical and food supply chains outpaced available refrigerated space. Two forces now shape the sector: the rise of industrial outdoor storage (IOS) for trailer staging and equipment adjacent to cold facilities, and mounting power constraints, since refrigerated buildings draw far more electricity per square foot than dry warehouse and increasingly compete with data centers for grid capacity.

Another secular trend is the share of products stored in refrigerated warehouses that are imported from abroad and also destined for export to other countries. This has led to higher trade volume, bolstering demand for cold storage facilities in coastal markets with access to ports. According to the USDA and as one example, fresh produce imports are projected to rise by 45% from 2016 to 2027. These increases in fresh and frozen foods is supported by a 2016 study conducted by Capgemini Consulting, indicating 73 percent of U.S. shipping and transportation companies expected to increase their use of outsourced logistics services in the coming years.

These growth trends have resulted in a recent industry report that confirmed the massive need for additional cold storage refrigerated space. However despite the demand projected for cold storage, given the high cost of construction, projects fail to get off the ground because speculative construction is beyond the risk profile of the vast majority of investors. By combining market research, customer acquisition assistance and real estate brokerage, we can ensure that this project is not just built, but is optimally configured for success.

The proliferation of food and beverage choices demanded by consumers impact the global cold chain. Users demand facilities that have dry food, cooler, refrigeration, and freezer capabilities. Often the energy bills on temperature controlled facilities dramatically drive up costs. In addition, users have to comply with USDA and other regulations. Food and Beverage Users face added challenges with perishable inventory risks. New innovations in temperature controlled containers are giving food companies new opportunities to save on transportation costs. User requirements vary from small local producers to global food manufacturers and their facilities include poultry plants, produce facilities, industrial kitchens, bakeries, meat plants, food service facilities, dairy plants, cheese plants, and distribution centers.