The global need for cold storage space is increasing dramatically, driven by growth in the world’s population, increased varieties of perishable commodities and consumer demand for fresh produce year-round rather than just when it is in season.

Occupancy rates at cold-storage facilities are at an all-time high, said Corey Rosenbusch, president of the Global Cold Chain Alliance. “There is denitely growing demand,” he said. “The industry feels like we’re in a good position right now with supply and demand, but there is pressure for more space.

”Ted Prince, chief operating officer at Tiger Cool Express, a provider of cold-chain transportation solutions, said the food and produce industry has gone global. “People are used to seeing grapes when they walk into the supermarket. They don’t think about where they are coming from,” he said.

A year ago, John Naylor, president of Western Distribution Services, a cold-storage provider based in Burien, Washington, built a new, 241,000-square-foot facility and sold it in just 10 weeks. “That tells you the demand,” he said.

Naylor’s warehouse came online just a couple of weeks ahead of the Northwest salmon season. “They sh for a short amount of time, we store it, and it moves out over the next 10- 11 months until the next season,” Naylor said, adding that the company augments the salmon business with other business. “We have a freezer and chill space. We also do a fair amount of retail for store deliveries and a lot of pick and pack and value-added services.”

When Michael Winburn, vice president of operations at Shetakis Wholesalers/Cold Storage Solutions, based in North Las Vegas, was looking for a new building several years ago, he found one that had double the freezer space he needed. “We went from 40-percent full to over 100-percent full,” he said. “I wish I could take on more.”

Today’s consumers have more choices than ever, and the proliferation of product options has had an impact on storage needs. “All of that has to go somewhere,” Rosenbusch said, adding that several factors are contributing to the capacity crunch. “The biggest is manufacturers are starting to build up inventory. After 2008 we saw food companies lean down their inventory and get as much of that inventory off of their balance sheets as possible. Now that the economy has come back somewhat, the food-processing companies and manufacturers are starting to rebuild their inventory.”

Prince said he is seeing an increased amount of health and beauty products and higher-end wine and beer moving via refrigerated container. Tiger Cool Express supplies 53-foot, intermodal refrigerated containers that can move on highways or by rail. It works directly with growers, retail customers, produce brokers, manufacturers and some third parties.

Seasonality issues also impact capacity, Rosenbusch said. “There is a big catch up in the Northwest with seafood that will fill up buildings. A drought has caused a lot of beef to be processed and that will go into cold-storage facilities,” he said. Shifting retail fulfillment policies are spurring cold-storage demand. “Many of the large retailers have penalties in place if you can’t meet their fill rates,” Rosenbusch said. “Food processors don’t want to be caught without the inventory in place to fill those orders.”

For grocers, produce is a top way to get people into the supermarket multiple times a week, so quality and availability is crucial. “The margins on that are a little better. When you see those Wednesday circulars advertising specials, it isn’t milk or bread on the cover. It is the produce,” Prince said.

Anne-Sophie Zerlang Karlsen, global head of reefer management for Maersk, said the overall refrigerated container market has grown 5 to 6 percent on average the last five years, outperforming global trade growth of 2 to 3 percent. She added that the market is expected to grow around 6.2 percent this year.

Maersk has a refrigerated warehouse in Vado, Italy, that focuses on fresh fruit, especially bananas, and the company operates a warehouse in Chile that focuses on fresh as well as on fresh fruit.

Zerlang Karlsen said she is seeing increased cold- chain investments made in ports as everyone works to keep up with demand. “The large destination ports in Europe, like Rotterdam for instance, see a significant increase in cold warehousing capacity these days,” she said.


Many companies that operate cold-storage facilities are willing to put in more space, but cold storage requires capitalintensive projects. “They can be tens of millions of dollars, even $100 million,” Rosenbusch said, adding that operators have to have a minimum commitment from customers before committing to that level of investment.

Naylor’s latest warehouse cost in the mid-$30 million range.

Winburn said that in his area, the rough cost of a building suitable for cold storage cost between $110 to $120 a square foot, and that doesn’t include the land. “The cost of everything is on the rise. It isn’t something that is easy to respond to and you’d want some sort of level of commitment to lay out that amount of money to have business come and go,” he said.

Although demand for cold storage is increasing, shippers are less likely to build their own facilities, relying on third-party storage instead, Rosenbusch said. “If you look at USDA’s capacity report of coldstorage facilities, about 75 percent of the space in the U.S. is operated by third parties,” he said. “Generally speaking, a food processor would want to make sure their capital is being deployed into their core competency, such as research and development, rather than distribution assets they can outsource.”

Winburn agreed that companies don’t want to invest in cold storage. “There are companies that have a production location and want to store their product regionally so they can service their customers better. Instead of investing in brick and mortar and the human assets, they hire a cold storage/third-party logistics company to handle the product for them. That is a big part of where our business comes from,” he said.

Utilizing third parties also gives manufacturers more flexibility regarding location. “Their distribution needs are constantly changing,” Rosenbusch said. “You look at a building that has a 30-year depreciated life to it. In that amount of time, product distribution and manufacturing needs change a lot. By using a thirdparty network, they are more agile.”

Choosing the right locations for facilities is crucial. Naylor’s latest building is positioned right in front of the airway at Sea-Tac airport in Seattle and is the closest cold-chain facility to the airport. “In today’s environment, the cold chain is the most important right now,” he said. “If you don’t maintain the cold chain, by the time they get to the destination, you could peel off two days’ shelf life.”

Naylor discovered that there was a hole in the cold chain for fresh cherries in particular. “We’re able to bring cherries over from eastern Washington and hold them in our cold facility for commercial or passenger flights going to Asia. We’ll probably grow in that area,” Naylor said.

In August, InterChange Group announced the construction of a new modern cold-storage facility in Mt. Crawford, Virginia, which will support the region’s growing food and beverage industries. There hasn’t been new cold storage construction in the area for at least 20 years, while the needs of the food and beverage producers have continued to increase, InterChange Group said in a statement. Producers had found it necessary to utilize cold-storage capacity outside of the area, which increases transportation costs.

The new InterChange Cold Storage facility will allow the products to be stored locally.

“This project creates vital infrastructure for the large and growing cluster of food and beverage industries in the Shenandoah Valley, which in turn produces major markets for Virginia farmers,” said Virginia Gov. Ralph Northam.


Rosenbusch said he has seen an increase in demand for low-charge, easy-to-install packages that use natural refrigerants. “We see it frequently, mainly driven by regulatory compliance challenges,” he said. “The shortage of refrigeration technicians and the availability of labor to maintain the large systems have also driven owners to look at alternatives that may not require highly skilled labor.

Low-charge systems require less square footage, which can appeal to operators. “If you have packages on the roof, you don’t need a central refrigeration room, so that could be additional storage space or you could have a smaller footprint,”

Rosenbusch said. Rosenbusch said he sees opportunity within the retail distribution space, particularly e-commerce and e-fulllment. “I don’t think it will mean the types of buildings will drastically change or the member companies doing the business will change, they’ll just be adding a different business line,” he said.


Handling the ripening of fruit can be a delicate balance. Zerlang Karlsen said extending the shelf life of the produce is key, and Maersk operates the largest fleet of controlled atmosphere containers in the world. “Here we can manipulate the atmosphere around the fruit during the transportation, through adjusting O2 levels, and hereby slow down the ripening of the fruit in transit, which means a longer shelf life of the produce when it hits the supermarkets,” she explained.

Controlled atmosphere is the most relevant technology for extending shelf life, Zerlang Karlsen said. Maersk has developed a product called Remote Container Management, which is all about transparency into the perishable supply chain. “With this product, customers have real-time access to data on location, temperature, humidity and O2 levels in their container. This enables them to make faster and better decisions, improve their communication with both customers and suppliers, as well as place liability in the supply chain in the off-case when something goes wrong,” Zerlang Karlsen said.

Fruit companies typically take over the ripening process once produce is delivered, to ensure that the fruit has the right maturity when presented to its customers, Zerlang Karlsen explained. She added that ripening is very relevant for bananas, avocados and mangos.

Rosenbusch said most ripening is done in retail distribution centers. “If you go into a Safeway, their distribution centers will have ripening rooms, mainly for bananas,” he said.

Demand for facilities that companies can use to control ripening is most prevalent in apples and are privately held, “Those don’t necessarily fall into our industry that we would consider third-party cold storage facilities that are storing for multiple clients, but there are some exceptions,” Rosenbusch explained.