Cold Storage Sector Primer
Overview:
Cold Storage is a niche real estate sector concerned with providing specialty storage for mainly food producers and food retailers.
Although the sector shares similar qualities as traditional industrial, Cold Storage is driven by steady food production and consumption.
The industry is operationally intensive as operators charge for stored goods on a per unit (pallet) basis and facilitate the movement of goods in and out of the facility.
This arrangement leads to lower overall operating margins than industrial properties (30-35% vs. 65-75%).
Although the sector shares similar qualities as traditional industrial, Cold Storage is driven by steady food production and consumption.
The industry is operationally intensive as operators charge for stored goods on a per unit (pallet) basis and facilitate the movement of goods in and out of the facility.
This arrangement leads to lower overall operating margins than industrial properties (30-35% vs. 65-75%).
Types of Properties:
Production-AdvancedLocated in close proximity to food processing facilities; usually in rural areas. Single-tenant properties are common. There is often a higher risk and reward.
Public
Medium-term storage, leased to high volume of tenants (up to 200), located
in both rural areas and close to MSAs.
DistributionLocated near MSAs, supports smaller volume of customers than public. Many
goods ship directly to retailers. There is often a lower risk and reward.
Property Characteristics
Business Overview
StorageDescription: Storage of food at optimal temperatures to ensure freshness until released.
Pricing: Variable (monthly “payper-use”) or year long Fixed Storage Commitment Contracts.
Value-Add Services
Warehouse Services
Description: Receiving product from the freezer to the dock and vice versa. Services include sorting, labeling, re-packaging, and freezing. Services provided by both internally owned and third-party managed facilities.
Pricing: Driven by throughput. Depends on product mix and weight.
TransportationDescription: Broker and manage transportation of frozen and perishable food. Services include consolidation, freight forwarding, and dedicated transport.
Pricing: Depends on type of service offered.
