Though numerous industries rely on cold storage assets to safely store products, the U.S. cold chain wasn’t prepared for the massive surge in grocery e-commerce during the coronavirus pandemic. Online grocery sales grew by more than 50% year-over-year, pushing cold chain real estate near capacity across the country. The cold chain in the United States will need at least 100 million square feet of additional space over the next five years.
The cold chain also has a cryogenic subsector that primarily serves the pharmaceutical industry. This network of ultra-cold-capable facilities has been strained well beyond capacity by the COVID-19 vaccine rollout. Sourcing for ultra-low temperature freezers has skyrocketed, increasing 522% year-over-year.
With demand far outpacing supply, it has become difficult for many businesses to secure enough cold storage space to meet their needs. Real estate developers are working as quickly as they can to add millions of square feet of temperature-controlled warehousing across the United States, but this sort of development often takes years. This article will explore some of the creative ways businesses and healthcare networks are gaining access to temporarily expanded cold storage capabilities.
Restaurants typically have walk-in refrigerators and freezers built directly into the facility. While this solution won’t work for large-scale storage needs, grocery sellers are successfully using walk-in solutions in dark stores to store additional inventory in support of online sales.
A dark store acts as a micro-fulfillment center, dedicated solely to fulfilling online grocery orders. This option is especially feasible for grocery stores located in larger shopping centers with empty restaurant space, as these empty spaces already have some walk-in cold storage installed.
Think Inside the Freezer Box
Pelletized ice cream from Dippin’ Dots requires storage at -40°F, but the process actually led to the development of freezers that can reliably hold temperatures down to -122°F. As it turns out, these ice-cream freezers have applications across the medical and research sectors. While they have other medical and laboratory uses, pharmacies and hospitals have most recently been sourcing freezers from Dippin’ Dots Cryogenics to store COVID-19 vaccines. Purchase options from this and other various ultra-cold freezer manufacturers range in size from chest freezers up to TEU and FEU shipping containers.
If you have warehouse space to spare, it may be possible to convert it into cold storage. While this practice may not be optimal in the long-term, it does provide some additional storage capacity for frozen and/or refrigerated goods while the hunt for more advanced cold storage space continues.
This sort of conversion isn’t always optimal because the warehouse loses vertical space for ventilation and refrigeration equipment. It’s also worth noting that the costs associated with converting portions of a dry storage warehouse into cold storage are relatively high. In a pinch, however, this could be an option for businesses with nowhere to expand.
Ask Your 3PL for Help
Savvy third-party logistics (3PL) providers have been systematically expanding temperature-controlled asset portfolios over the past year to meet the growing needs of their e-commerce and pharmaceutical customers. If you need much more space than what the above options can provide, a 3PL is your best bet. In a tight-capacity market, the 3PL will locate the space you need in the market you need it. This service takes a lot of pressure off of your business and allows you to focus on core competencies, such as growth and revenue generation.
Leveraging the 3PL’s expertise will also help you to get more out of less cold storage space. A logistics provider will bring the weight of their experience and logistics technology to bear, ensuring that your temperature-controlled warehouse uses all available space in the most optimal way. This capability is especially important at times like these, when temperature-controlled industrial real estate is at maximum capacity.
About Phoenix Investors
Founded by Frank P. Crivello in 1994, Phoenix Investors and its affiliates (collectively “Phoenix”) are a leader in the acquisition, development, renovation, and repositioning of industrial facilities throughout the United States. Utilizing a disciplined investment approach and successful partnerships with institutional capital sources, corporations and public stakeholders, Phoenix has developed a proven track record of generating superior risk adjusted returns, while providing cost-efficient lease rates for its growing portfolio of national tenants. Its efforts inspire and drive the transformation and reinvigoration of the economic engines in the communities it serves. Phoenix continues to be defined by thoughtful relationships, sophisticated investment tools, cost efficient solutions, and a reputation for success.
Mr. Frank P. Crivello began his real estate career in 1982, focusing his investments in multifamily, office, industrial, and shopping center developments across the United States. From 1994 to 2008, Mr. Crivello assisted Phoenix Investors in its execution of its then business model of acquiring net lease commercial real estate across the United States. Since 2009, Mr. Crivello has assisted Phoenix Investors in the shift of its core focus to the acquisition of industrial real estate throughout the country.
Given his extensive experience in all aspects of commercial real estate, Mr. Crivello provides strategic and operational input to Phoenix Investors and its affiliated companies.
Mr. Crivello received a B.A., Magna Cum Laude, from Brown University and the London School of Economics, while completing a double major in Economics and Political Science; he is a member of Phi Beta Kappa. Outside of his business interests, Mr. Crivello invests his time, energy, and financial support across a wide net of charitable projects and organizations.