Commercial cold storage outlook: Demand hard to predict amid COVID volatility

The pre-COVID Canadian cold storage landscape was growing, with trends in domestic and global food markets driving much of that demand. Since 2019, quick growth of the pharmaceutical industry and enhanced food safety standards have led to roughly 8% growth in capacity.

Some analysts expect the North American cold storage market size to reach US$86.5 billion by 2028. That would be expanding at a 10.7% compound annual growth rate. As we approach our third pandemic year, the question is how COVID’s upheaval has impacted the market for cold storage.

While rising Canadian food trade (e.g., meat and vegetables) may also influence the demand for cold storage, we know that COVID-19 has shifted domestic and global food consumption trends. In Canada as elsewhere, the pandemic has amplified consumer preferences for fresh and locally produced food, and it has furthered growth of online shopping models.

Pre-COVID demand for cold storage on the rise

The cold storage market has experienced significant growth over the past three or four years, thanks to population growth and consumer preferences for more fresh, perishable food that’s temperature sensitive.

Demand was evident in rental lease rates for facilities that were trending higher. Because refrigerated warehouse buildings are usually built for a specific tenant, lease terms tend to be lengthy. Lessees can sublet space to other businesses, but those industry characteristics limit availability for new or expanding businesses. That’s worsened by high start-up costs, including construction for a new refrigerated warehouse ranging between $325 to $450+ per square foot. Along with hefty service fees for facilities, these features may deter smaller companies from entering the cold storage space.

Growth in cold-storage food trade cools recently

Canada’s agri-food sectors have set ambitious goals for exports by 2025. Thanks to strong global demand and higher prices, Canadian agri-food export values grew to $81.2 billion in 2021. Canada’s overall food export volumes also trended upward between 2015 and 2020, with fats and oils (HS15) growing at a 5.6% average annual rate and meat (HS02) with 4.9% average annual growth. While higher export targets have increased production capacity and need for larger cold storage space, a volatile pace of both imports and exports could create periods of under- and over-capacity storage utilization... Read More