Cold Storage Demand on the Rise

The pandemic has driven e-commerce activity to new heights, with industrial demand—particularly for refrigerated warehouses—reaching skyrocketing rates, the latest CommercialEdge industrial report shows. This was attributed to changing consumer preferences for grocery deliveries and meal kits, as well as pharmaceutical companies’ ongoing need for cold storage facilities for raw materials and finished products, such as the COVID-19 vaccine. Transaction volume for cold storage spaces located close to densely populated areas amounted to $2 billion in 2021. These assets changed hands at an average price of $157 per square foot, which was 40 percent higher than the national average price.

National average full-service equivalent listing rates averaged $6.40 per square foot in December, up 510 basis points year-over-year. Port markets—particularly from Southern California—led the way in industrial rent growth: The Inland Empire had the highest rent growth over the last 12 months (6.3 percent), closely followed by Los Angeles (6.2 percent) and Orange County (5.1 percent). Thanks to soaring industrial demand, a new signed lease averaged $7.28 per square foot in the last 12 months, 14 percent more than the overall rental rate.

Office vacancy nationwide clocked in at 5.7 percent in December, unchanged from the previous month. At a 0.9 percent vacancy rate, industrial supply in the Inland Empire continues to remain tight—a trend that speaks to the rest of Southern California. Both Los Angeles (2.8 percent vacancy) and Orange County (3.8 percent vacancy) had vacancy rates below the national average. Low figures were also recorded in Midwestern logistics hubs such as Columbus (2.5 percent) and Indianapolis (3.8 percent).

Nearly 322 million square feet of industrial space was delivered in 2021 across the nation, accounting for 3.4 percent of inventory. Given an end-of-the-year lag in collecting supply data, last year’s completions will likely surpass 2020’s total of 324.1 million square feet, reaching a new record. Phoenix led the way in terms of new supply, adding 10.3 million square feet of space to its industrial inventory in 2021, which translates into an 11 percent increase in total stock.

Read the full CommercialEdge report.