At the intersection of the globalization of supply chains, the rise of e-commerce, and shifting consumer demographics is a growing real estate asset class: cold storage. The food industry is increasingly relying on cold storage facilities to keep their products at the ideal temperature en route to their destination. Today we chat with Frank Black, Senior Vice President at Premier Development Partners, about national and local trends in the cold storage market.

The conversation below has been edited for length and clarity.

What factors are most important to consider when selecting a site for a cold storage facility?

One of the most crucial factors is the availability of utilities. Cold storage operations place significant demands on power and water supply, making it essential that these utilities are readily available at the site and can support the required capacity. If the necessary utilities aren’t in place, it can lead to delays in project delivery and overall cost increases.

It is also critical to review the site’s zoning regulations, especially in relation to the building’s clear height. Certain cold storage facilities may need to reach heights up to 100 feet, and it’s important to confirm that local zoning laws will allow this in order to avoid potential setbacks during the permitting process.

 

How has demand for cold storage facilities evolved over the past few years?

The demand for cold storage facilities has evolved significantly over the past few years, driven by urbanization, the rise of e-commerce, and the need to modernize aging infrastructure. As of 2024, there was approximately 623.5 million square feet of cold storage space across nearly 7,000 buildings in the US. Over half of this space is concentrated in just eight states, including California (17.5%) and Ohio (3.9%). The shift from rural to urban areas has led to increased demand for localized, last-mile distribution centers to support the quick delivery of perishable goods.

Additionally, the growth of e-commerce, particularly in the grocery sector (online sales are currently worth $1.6 trillion and expected to increase 13%), has intensified the need for modern cold storage solutions. Currently, 77% of the 10 million square feet of cold storage space under construction is pre-leased, reflecting strong demand in response to the expanding need for efficient and reliable cold chain systems.

Aging facilities and technology advances are accelerating the push for newer facilities with energy-efficient refrigeration, automation, and improved operational systems to meet the growing demands of the modern food supply chain. An average of 4.5 million square feet of new cold storage space is completed annually.

This trend is further reinforced by the significant rise in e-commerce, which requires a robust cold storage infrastructure capable of handling perishable goods and supporting fast delivery times. The evolving landscape of the cold storage industry indicates continued growth, with significant investments in both modernizing existing facilities and expanding the cold chain network to better serve urban centers and e-commerce needs.

 

If a company needs cold storage space, is it better to build a new facility customized to their needs or to renovate existing warehouse space?

A new cold storage facility can cost anywhere between $250 to $350 per square foot to build, roughly two to three times more expensive than traditional warehouse space. This significant cost increase is due to the extensive refrigeration equipment, additional steel supports, high-speed doors, cold-dock systems, and specialized building envelopes such as insulated metal panels and concrete slabs with under-floor insulation.

New cold storage facilities also have longer construction timelines, often taking four to five months longer than a standard warehouse build. Additionally, they tend to be much more expensive to operate due to the high energy consumption required to run refrigeration systems. Operational costs can be up to four times higher per square foot compared to traditional warehouses.

Renovating an existing warehouse would seem to present a more budget-friendly solution; however, this option comes with its own unique set of challenges. Typically, it costs between $150 to $175 per square foot to renovate an existing facility. The additional cost is because existing structures may not be designed to accommodate specialized systems, thus requiring substantial retrofitting. Older buildings may also have limitations in space or insulation, which can impact the efficiency of cold storage operations.

There are several crucial factors that owners should keep in mind when retrofitting a warehouse for cold storage. First, it’s essential to cut a thermal break into the warehouse concrete floor if you need to create a low-temperature cooler within the existing facility. This ensures the cold does not transfer through the flooring, which can lead to condensation outside of the cooler. Another consideration is that placing the cooler box against an exterior wall with steel columns can result in a tight airspace that traps pockets of warm air from the outside, negatively affecting energy efficiency. Ideally, the cooler should be positioned away from exterior walls to allow for free airflow. If placing the cooler against the exterior wall is unavoidable, the space in between must be properly insulated or ventilated.

Another factor to keep in mind is structural compatibility when building a “box within a box”—a cold room inside a larger, ambient warehouse. This typically involves installing refrigeration systems and supporting components, and these are often mounted to the roof structure. It’s crucial to have a structural engineer assess the building’s ability to support the additional weight and ensure that the steel structure is adequately reinforced. Additionally, if there’s a ceiling with cold air below it and warm, moist air in the cavity above, it’s essential to have mechanical ventilation in place to remove the warm, moist air before condensation can occur.

Lastly, the position and type of doors are important for preventing moisture-related issues. When a building has a cooler or freezer box, the door needs to be positioned far enough away from the loading dock doors. The repeated opening and closing of dock doors—especially in hot weather—introduces moisture that can lead to condensation. A strategically placed cold storage room door can help reduce this risk. Additionally, selecting the right door materials is essential for durability and efficiency. Options include corrosion-resistant FRP doors for areas that require regular washdowns and high-speed roll-up doors for high-traffic spaces.

 

What should companies consider when developing a long-term cold storage strategy?

A critical first step in developing a long-term cold storage strategy is understanding your specific temperature and storage requirements and then evaluating whether to build a new facility or retrofit an existing one. While new construction allows for full customization and integration of the latest technology, it typically comes at a much higher cost per square foot and a longer timeline. In contrast, retrofitting can offer considerable savings if the existing structure is well-suited to cold storage modifications.

Beyond project type, companies should also prioritize utility availability, zoning flexibility, and access to transportation infrastructure, particularly for urban, last-mile, or e-commerce-focused operations. Additionally, incorporating energy-efficient refrigeration, automation, and smart monitoring systems is increasingly vital to ensure long-term cost control and operational reliability.

An effective cold storage strategy successfully balances current requirements with future growth. It aligns decisions regarding real estate and infrastructure with broader business objectives. By collaborating with experienced partners and thoroughly assessing all available options, companies can develop facilities that promote both short-term efficiency and long-term resilience.

 

Cold Storage is a niche field with many more factors to consider beyond a standard warehouse. As demand for cold storage facilities continues to grow, it is important to consider keep these considerations in mind when finding or building a facility to meet your business’s needs. Partnering with an industry expert with a proven track record is the first step in your project’s success.

About the Author

Frank Black has over 15 years of experience and serves as Vice President of Premier Development Partners, where he is responsible for identifying, analyzing, and originating ground-up development and value-add investment opportunities. Frank is also engaged in complex contract negotiations, market analysis, underwriting, due diligence, financial modeling, leasing, asset acquisition, and disposition. Prior to joining Premier, Frank served as a corporate portfolio manager leading cross-functional teams in asset optimization and rightsizing throughout Europe, The Middle East & Africa, and North America.