Cold storage is one of the most misunderstood corners of commercial real estate and, as a consequence, one of the most lucrative. For decades, refrigerated warehouses existed outside the spotlight, built for food distributors and a handful of logistics operators. Today, demand has surged, fueled by grocery e-commerce, pharmaceuticals, and shifting consumer expectations for faster, fresher delivery.
Yet while interest from investors has never been higher, cold storage remains an asset class with steep barriers to entry. Development costs, operating complexity, and tenant requirements are very different from standard industrial space. As Clifford Booth, founder and CEO of Westmount Realty Capital, explained on The Real Finds Podcast:
“The antique and art business did not go that great, but the real estate that we acquired did well. I paid attention to that. And when we converted our first Dallas warehouse into cold storage in the 1980s, that was the real eye-opener. I realized this was a sector with staying power.”
Drawing on lessons from early pioneers like Booth, here are the 10 keys to developing, buying, and investing in cold storage facilities.
1. Know the Demand Drivers
Cold storage demand is sticky because it serves non-discretionary sectors. Three primary drivers stand out:
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Food consumption & grocery e-commerce: Online grocery sales are projected to reach 20% penetration by 2026, up from just 4–5% pre-pandemic.
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Supply chain resilience: Companies are building inventory buffers after COVID-19 exposed vulnerabilities.
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Pharmaceuticals & biotech: Vaccines, biologics, and other therapies require ultra-precise environments.
Booth put it simply:
“Food and medicine don’t go out of style. They may change in how they’re delivered, but they always need reliable cold storage behind the scenes.”
2. Understand the Barriers to Entry
Despite surging demand, supply hasn’t kept up. Why?
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High costs: Cold storage can cost 2–3 times more per square foot to build than standard warehouses.
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Operational complexity: Segmented temperature zones, humidity control, and back-up power add layers of risk.
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Limited expertise: Fewer contractors and developers know how to design and build correctly.
As Booth recalled:
“Back in the early days, we had to figure it out ourselves. There weren’t consultants or playbooks for refrigerated facilities. That complexity hasn’t gone away.”
3. Location is Everything
Like last-mile warehouses, cold storage thrives in infill locations close to dense populations. Proximity to highways, ports, and airports is a major differentiator.
The rise of grocery delivery makes being close to consumers even more critical. Investors should prioritize locations that reduce delivery times and transportation costs.
Booth shared:
“Infill cold storage is gold. The closer you are to rooftops, the more valuable that space becomes.”
4. Tenant Credit and Lease Structure Matter
Cold storage tenants often include grocery chains, food distributors, or pharmaceutical logistics providers. These businesses rely on the facility for their survival, but lease structures vary.
Investors should focus on:
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Long leases with strong credit tenants
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Triple net leases where tenants cover operating expenses
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Mission-critical occupancy, which makes tenants less likely to relocate
Booth noted:
“We learned early that if you land a grocer or a distributor, they don’t move easily. The switching costs are too high.”
5. Evaluate the Infrastructure Carefully
Cold storage facilities are only as good as their systems. Investors should inspect:
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Refrigeration equipment age and capacity
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Insulation integrity
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Floor strength for heavy racking systems
A facility with outdated systems can become a CapEx trap. “Cheap” buildings often require millions in upgrades.
“One of our mistakes was underestimating the wear and tear on refrigeration equipment. You have to budget for it — always,” Booth cautioned.
6. Decide Between Ground-Up Development and Repositioning
There are two paths:
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Ground-up development: Purpose-built, modern, automation-ready, but costly and time-consuming.
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Brownfield conversion: Repositioning an existing warehouse can be faster and cheaper, if the bones fit.
Booth’s career highlights this:
“Our first big cold storage success came from converting a basic Dallas warehouse. It wasn’t fancy, but it met a need. That playbook still works.”
Conversions are especially valuable in infill markets where land is scarce.
7. Partner with Experienced Operators
Cold storage is often managed by third-party logistics (3PL) operators. Investors without in-house expertise should consider joint ventures or long-term partnerships.
An experienced operator brings:
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Efficiency in labor and energy use
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Tenant relationships
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Reduced downtime and higher utilization
Booth explained:
“I always believed in aligning with the people who knew the operations. We brought the capital and real estate expertise — they brought the cold chain expertise. That’s how you win.”
8. Incorporate Technology and Automation
Labor is expensive and difficult to source in freezing environments. Automation is changing the economics.
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Automated Storage & Retrieval Systems (ASRS) reduce headcount.
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IoT sensors allow real-time temperature monitoring.
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Energy-efficient refrigeration lowers costs and boosts ESG credentials.
Booth sees this as a long-term trend:
“The tenants that embrace automation will be the stickiest. And the buildings that enable automation will command premiums.”
9. Plan Your Exit Early
Cold storage is attracting institutional investors eager for stabilized assets. But lease-up takes time, and CapEx reserves are non-negotiable.
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Investors should underwrite conservatively, plan for longer lease negotiations, and model major equipment replacements.
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Exit premiums are real: stabilized cold storage often trades at compressed cap rates compared to dry warehouses.
Booth summarized:
“Cold storage buyers are paying up because they know it’s hard to replicate. Scarcity creates value.”
10. Think Long-Term: Cold Storage is Infrastructure
Cold storage is not a passing trend. It is infrastructure for the modern economy, with demand tied to essential industries.
“We were buying cold storage when no one else cared. Today everyone cares. But the fundamentals haven’t changed — if you own the right building in the right market, you’re in business for decades,” Booth said.
Investors who view cold storage as long-term infrastructure, rather than a speculative niche, are positioned to reap steady returns.
Conclusion
Cold storage is no longer an afterthought in the industrial real estate world. It is becoming a core asset class, driven by structural demand from food, pharma, and logistics.
But success requires more than capital. It demands expertise, patience, and a willingness to embrace complexity. Those who understand the 10 keys from market drivers and location to systems, partnerships, and automation will separate themselves from the pack.
As Cliff Booth’s career illustrates, the best opportunities are often in the overlooked niches. In the 1980s, he turned a modest Dallas warehouse into a cold storage facility when few saw the potential. Today, with global investors crowding the space, the same lesson applies: the future of industrial real estate may very well be frozen.
To watch Cliff’s full episode -> Watch Here
To learn about cold storage opportunities -> Our team of Chicagoland commercial real estate agents.