Complexities of Cold Storage Keep Supply Low as Demand Rises

With a booming tourism sector and a growing population overall, South Florida is an especially strong marketplace for cold storage warehouse space. It’s also a vantage point from which Lee & Associates South Florida’s President, Matthew Rotolante, a cold storage specialist, can provide insights into why demand in the sector is growing but supply is not.

Q: We’ve been hearing that demand for refrigerated warehouse space is on the rise. Is supply keeping up with demand?

Rotolante: Demand for refrigerated space is definitely on the rise, primarily, due to the overall growth in consumption in South Florida. This is fueled by our robust tourism industry, serving 46 million tourists who visit South Florida each year as compared to the 6.2 million residents who live here year-round. The cruise ship industry alone accounts for 10 million of that demand. While there are several new cold storage projects, or a total of about 30,000 pallet positions, supply remains tight and pricing strong.

Q: How is this affecting vacancy rates in this specialty area?

Rotolante: Vacancy rates for cold storage are certainly lower than the overall industrial vacancy rate. Given that cold storage makes up a small percentage of the entire industrial marketplace, combined with the fact that it is much more expensive, it is not common that you will see developers looking to build refrigerated buildings, except on a build-to-suit basis. Naturally, this limits supply, and with high demand we know that vacancy rates must be tight under this scenario.

Q: What are some of the challenges in developing refrigerated product? Can it be adapted/retrofitted from existing space?

Rotolante: Until recently, the majority of the cold storage buildings available in the marketplace had been retrofitted for cold storage. Buildings can be either freezer (32°-) or cooler (32°+). Cooler tends to be much easier. Although you still need the heavy power, the panel walls, evaporator equipment, etc., you don’t have to worry about the damage caused by expanding water when it freezes. Freezers have additional requirements that can make finding and retrofitting a building more difficult and expensive, and also make it harder to find a suitable building to convert.

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