Cold storage space is at a premium in North America and there is little sign of a let up.
Demanding Business. Temperature-Controlled Warehousing, “Cold Storage” space is at a premium and there are few signs that the squeeze on facilities will abate at any time soon.
Although there are a number of reasons for the growth in demand for cold storage space, fundamentally it comes down to an increase in the movement of perishable goods.
For example, perishable imports were steady even during the period of the COVID-19 lockdowns. Consumers dropped buying durables and shifted to consumables like foodstuffs. And even in this post-pandemic shift back to more retail oriented sales, the trade in perishables continues to flourish. (See Peter Buxbaum story on page 10)
Descartes Datamyne, a company specializing in the collection of international trade data, in a recent trade and analysis paper noted U.S. imports of perishable goods are still posting high volumes. According to Datamyne thus far 2021 imports are 11.58% higher than the same period in 2020 and more importantly, 19.1% over pre-pandemic 2019, as measured in terms of TEU (twenty-foot equivalent units).
The biggest contributor to the perishable trade is the ubiquitous banana. It is still king of crops in the perishable business by volume, although the avocado has challenged the bananas’ dominance in monetary terms. Around 43% of the banana imports come from Guatemala with other Latin American nations splitting up most of the remaining volume. According to Datamyne, bananas still remain the top perishable import item by volume for U.S., although statistically the banana has slipped some in market share in 2021. In 2020, bananas (imported under HS 0803) represented 22.7% of perishable imports (as measured in TEUs) but has declined this year (2021) to 19.6%. Whether the decline is an anomaly or a trend is still too early to call, as post-pandemic consumer spending habits have yet to find the “new normal.”
The consumer habits developed during the lockdowns – ordering food online or arranging pickups, the trend among the young for the delivery of more fresh produce and other perishables to the home is not likely to stop even with a full return to pre-COVID status of traditional retail food stores. According to a Deloitte study, the online share of all food and beverage sales surged to more than 10% during 2020 and the trend seems to be continuing even with the opening of bars and restaurants. Travel is also still chaotic and consumption in restaurants and hotels is up but not to pre-COVID marks. What the U.S. economy (and indeed the global economy) will eventually look like is still a bit of a mystery but nonetheless, perishables imports have become a big part of the story for the rising demand for cold storage space.
International Association of Refrigerated Warehouses (IARW) annually publishes a list of the top cold storage companies. Notably, IARW’s list is remarkably top heavy. In the IARW’s latest version Lineage Logistics headquartered in Novi, Michigan tops the list at over 1.67 million cu/ft of cold storage space with Americold headquartered in Atlanta, Georgia ranked number two with nearly 1.2 million cu/ft of cold storage capacity. In a distant slot at number three is United States Cold Storage based in Camden, New Jersey with just over 380,000 cu/ft and Interstate Warehousing, Inc based in Denver, Colorado with 137,000 cu/ft sitting in the fourth slot. Roughly speaking, Lineage has over 25% and Americold 21% of the U.S. market share.
But that’s only part of the story. The sector has a number of 3PLs heavily invested in refrigerated warehousing. There are a number of notable names like DHL, XPO, Ryder, FedEx, Geodis, Penske not to mention the ultimate corporate outlier, Amazon are also players in the cold storage sector.
Overall, it is estimated by the IARW that the U.S. has around 5,509 million cu/ft of cold storage – a significant slice of the global refrigerated warehousing figure of 25,391 million cu/ft.
Investment in cold storage facilities faces many of the same challenges as dry warehousing and other companies in the logistics sector. Finding property, developing or redeveloping property in locations near consuming areas but also with easy access to the “product” itself is problematical.
Cold storage facilities by their nature are more capital and operationally intensive than traditional warehouses. Equally, the high upfront costs and operational demands and linkage to the food industry have made the sector more resilient to disruptive events like COVID-19 or economic crashes than DCs type operations.
Strategically, being a port area – particularly an urban port area – is extremely advantageous combining access to the freight and proximity to consumers. But finding such sites often requires some creative out of the box thinking as was the case with Lineage’s new facility in Virginia.
|Top 3PL Temperature Controlled Warehousing|
|Company||Headquarters||Warehouse Square Feet||Number of Warehouses|
|DHL Supply Chain North America||Westerville, OH||139.0||439|
|XPO Logistics||Greenwich, CT||90.0||400|
|Ryder Supply Chain Solutions||Miami, FL||56.4||328|
|GEODIS North America||Brentwood, TN||44.0||142|
|Lineage Logistics||Novi, MI||37.0||190|
|FedEx Logistics||Memphis, TN||30.7||110|
|Kenco Logistics Services||Chattanooga, TN||26||90|
|CJ Logistics North America||Des Plains, IL||24.9||66|
|Penske Logistics||Reading, PA||24.6||70|
|DB Schenker North America||Chesapeake, VA||23.7||91|
|Saddle Creek Logistics Services||Lakeland, FL||22.5||70|
|Kuehne + Nagel North America||Jersey City, NJ||18.7||87|
|Ceva Logistics North America||Houston, TX||18.1||119|
|UPS Supply Chain Solutions||Alpharetta, GA||17.3||144|
|Warehouse Services||Piedmont, SC||14.0||30|
|APL Logistics North America||Scottsdale, AZ||12.7||44|
|Radial||King of Prussia, PA||11.7||21|
Source: Armstrong and Associates
Cold Storage Properties are Hot
In late October, Lineage Logistics opened a $84 million cold storage facility adjacent to the Virginia International Gateway (VIT) in Portsmouth, Virginia. The 167,264 square-foot facility, includes 26,000 pallet positions and blast freezing capabilities and automation technology increases storage density, maximizes capacity, provides real-time inventory management. Building the facility was a collaborative PPP (public-private partnership) effort between Lineage, the Portsmouth Economic Development, the Virginia Economic Development Partnership, the Portsmouth Ports & Industrial Commission, and the Virginia Port Authority. The new facility was built on a former chemical plant site that was previously vacant.
A second strategy that refrigerated warehouse companies have deployed to gain access to critical space is through acquisition. For instance, Americold has been on a buying spree since the beginning of 2020, which has significantly added space to its portfolio of cold storage units. In December 2020, Americold acquired Newport Cold Storage a 6.1 million cu/ft temperature-controlled facility, containing approximately 26,000 pallet positions located in St. Paul, Minnesota. The company also bought AM-C Warehouses in the Dallas-Fort Worth, TX market totaling 13.8 million cubic feet, for $82.5 million and added a 3.2 million cu/ft cold storage facility in Tampa, Florida for $25.0 million. In addition, Americold added Nova Cold which has facilities in three locations (Toronto, Calgary, and Halifax) totaling 23.5 million cu/ft with approximately 81,000 pallet positions. However, by far the largest move by Americold was the acquisition of Agro Merchants Group for $1.74 billion.
Agro before the acquisition was the fourth-largest temperature-controlled warehouse company in the world, the third-largest in Europe and the fourth-largest in the U.S. The transaction included 17 facilities in the U.S. totaling 115 million cu/ft in eight states, as well as 26 facilities in Europe totaling 111 million cubic feet that are located in the U.K., Netherlands, Portugal, Ireland, Austria, Spain and Poland. Two facilities in Brisbane, Australia, a majority interest in a Chilean property and minority stake in a Brazilian joint venture were part of the acquisition.
As the demand for cold storage warehousing continues to surge both from legacy businesses such as traditional food manufacturers and retailers, along with a rising home delivery segment, will the push refrigerated warehouse companies need to look far and wide to find the right space to keep growing.
|2021 IARW Top 25 Cold Storage Warehouse Companies|
|Company||2021 Capacity (cubic feet)|
|3||United States Cold Storage||381,841,950|
|4||Interstate Warehousing, Inc.||137,251,299|
|8||Conestoga Cold Storage||64,313,826|
|9||Congebec Logistics, Inc.||57,741,880|
|14||Trenton Cold Storage, Inc.||34,277,373|
|18||Midwest Refrigerated Services, Inc.||23,433,765|
|20||Interstate Cold Storage, Inc.||21,403,000|
|21||SnoTemp Cold Storage||19,067,775|
|22||Valley Cold Storage & Transportation||18,002,030|
|23||Central Storage & Warehouse Co||16,678,389|
|24||Merchandise Warehouse Co., Inc.||15,159,000|
|25||Bellingham Cold Storage Co.||15,147,000|
As of June 17, 2021