I recently attended the NAIOP I.CON Cold Storage conference and heard perspectives from different industry leaders on the future of cold storage, a sector that’s becoming increasingly important as consumer expectations for fresh goods and e-commerce continue to drive demand.

Demand for Cold Storage is Skyrocketing

Across industries like food, pharmaceuticals, and biotechnology, the demand for temperature-sensitive goods is rising quickly. This is fueled by consumer preferences for fresh, high-quality products and the growth of e-commerce. Cold storage developers are answering the call by building modern, highly efficient facilities that meet these needs. However, there are challenges, primarily around reducing environmental impact and ensuring these facilities can meet today’s throughput requirements.

One analogy that stood out during the conference came from Josh Lewis of RL Cold. He compared older cold storage facilities to outdated coolers that barely keep ice frozen, while modern facilities are like Yeti coolers, capable of keeping ice frozen for days. This gap between old and new assets highlights the complexity of developing cold storage solutions today. Speculative builds are particularly tricky because developers often don’t know the end user in advance, and cold storage has many subcategories, from food processing to pharmaceuticals.

Investing in Cold Storage is a Steep Learning Curve—but Worth It

Cold storage is drawing more interest from investors than ever before, with stable cash flows and long-term lease opportunities in essential sectors like food and pharmaceuticals making it an attractive asset class. That said, there’s a steep learning curve. It often takes investors nine to twelve months to get comfortable with a particular developer or operator, and I heard this echoed by several panelists at the conference.

Despite these complexities, cold storage represents a huge opportunity for institutional investors, private equity firms, and REITs. The potential for long-term growth, driven by the rise of e-commerce and the increasing need for perishable goods storage, makes it a smart play for those willing to understand its intricacies.

Cold Storage Leasing is a Long-Term Game

Leasing in the cold storage space isn’t your typical real estate transaction. These deals often involve long-term commitments, giving tenants security and the flexibility they need to manage inventory. Location, facility design, and regulatory compliance are critical factors in leasing agreements, especially for industries like pharmaceuticals and food.

A key takeaway here is that cold storage leasing deals often take longer to finalize due to their complexity. As businesses optimize their supply chains, landlords who invest in energy-efficient designs and cutting-edge technologies will be in a better position to attract top-tier tenants.

Innovation is Key to Cold Storage Design and Operations

The design and operation of cold storage facilities are evolving quickly. Developers are adopting innovative approaches to maximize energy efficiency, increase capacity, and meet stringent health and safety regulations. Facility design must carefully balance insulation, refrigeration, and layout to ensure operational success.

But it’s not just about building the facility. Running it effectively is a challenge in itself. Cold storage operators must stay on top of complex regulatory requirements while also adapting to changing consumer and supply chain demands. The future of cold storage distribution will likely see even more innovation, as new technologies and approaches redefine how goods are handled and transported. As cold storage becomes a critical component of the modern supply chain, developers, investors, and operators alike need to continue adapting to meet growing demands.