Is Cold Storage Industrial’s Coolest Asset Class?

Over the past few years, cold storage has emerged as one of the ‘coolest’ and most lucrative asset classes in Australian industrial property.

It might seem like a simple concept, but in reality, it is a highly-sophisticated sector spanning four general tiers:

• Ambient (+10 – +20 degrees)
• Chiller (0 – +5 degrees)
• Frozen (-18 degrees or lower)
• Dry (no climate control)

Earlier this year, The Industrialist reported that Australia is in significant need of extra cold storage space, requiring up to 400,000 sq m of new stock by 2028. Here is our take on the emergent property vertical.

What is Driving Activity?

The surge in demand for cold warehousing has largely been driven by the rise of e-commerce, particularly online grocery and meal delivery services in need of ‘last-mile’ refrigerated space to extend the life of perishable food products.

During the pandemic in 2021, the size of the local online grocery sales and delivery market grew by roughly 46.2 per cent, according to market research firm IbisWorld.

Compounding this upward pressure on the sector is the pharmaceutical industry, with organisations needing additional temperature-controlled properties to securely store vaccines, or other biological and medical items.

The upshot here is that transactions and new developments in the refrigerated logistics space have been heating up, creating excellent growth conditions for the market – underpinning longer leases and higher rents for property owners and investors.

Current Market Conditions

Despite growing cross-industry demand, the supply of cold storage facilities is still limited and existing space is being fiercely contested.

Naturally, this is driving a flurry of landmark developments across the country to try keep pace with future demand

The biggest cold storage facility in Australia has the capacity for 225,000 pallets and is located at Truganina in Victoria.

Developed by Dutch-based cold-logistics firm NewCold, this sprawling state-of-the-art property is 43-metres tall, which creates a layered temperature-controlled environment capable of ambient, chill and frozen requirements.

NewCold has invested over $450 million in the local sector, and other Australian and international developers are following suit, with the current General Warehousing and Cold Storage market estimated to reach $9 billion this year, further IbisWorld research shows.

Next Opportunities for Cold Storage

Technological advancements are making cold storage more efficient and cost-effective for operators, developers and investors.

Innovations in energy-efficient refrigeration, automation and AI-driven inventory systems are improving facility operations, reducing costs and ensuring greater reliability.

For investors, cold storage offers the potential for strong returns. Premium rents, long-term leases and high-quality tenants, such as large food distributors and pharmaceutical companies are driving stable long-term income streams.

Prime locations, especially in fringe areas around Australia’s capitals will remain key to the success of cold storage investments. Blocks in close proximity to major transportation hubs and high-density areas will be greatly sought-after in the next 24 months.

As the cold storage sector continues to grow, it is clear that this asset class offers significant potential. If you are looking to explore investment opportunities in this space and would like to understand the opportunities and risks associated with the sector, please connect with us at info@jonesre.com.au.