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Developers Flock to Cold Storage as Americans Stock Their Freezers

“The immediate change in consumer behavior due to Covid has caused companies to change how they service those demands,” said Art Rasmussen, a senior vice president at CBRE, a real estate investment and services firm. “Covid has accelerated the online growth by several years, and the infrastructure wasn’t quite ready to take on that capacity.”

Building near population centers is logical, but not necessarily easy or cheap. “Traditionally, people shied away from it because it was capital intensive,” said Tim O’Rourke, managing director at real estate research and services firm JLL.

“Supply and demand are very tight in this industry and always have been,” said Mr. Boehler, the Americold chief. Demand in particular for cold storage catering to the retail sector boomed during the pandemic. “Overnight, it went up 40 percent in terms of demand,” he said.

Building cold storage space can cost $150 per square foot, about three times as much as that of conventional warehouse space, so the “if you build it, they will come” development model used for other types of industrial real estate — typically referred to in the industry as building “on spec” — has not been financially feasible. Shovels go into the ground only after tenants have committed and leases have been signed. The upshot is tighter supply, when companies need a lot more of this space quickly.

Converting existing warehouses generally is not an option. Paradoxically, given that they are constructed to store goods in subzero conditions, cold-storage warehouses need heated floors. Mr. O’Rourke said the intensity of the cold generated by industrial-strength refrigeration equipment can seep into the ground, creating an artificial permafrost. When that frozen ground expands, it is likely to warp a building’s foundation.

Cold-storage facilities require numerous other specialized construction elements to meet safety regulations and manufacturers’ quality standards.

“If you have your ice cream you just bought and bring it home, what happens at the end of the week to that ice cream?” Mr. Boehler said. “It’s got crystals, it’s got a weird coating. The product itself starts to break down.

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