Refrigerated Warehouse Vacancies Surge to Two-Decade Peak After Pandemic Build-Out

U.S. Cold-Storage Vacancies Reach 20-Year Peak at 10.5% After Pandemic Building Surge

• National refrigerated warehouse vacancy hit 10.5%, the highest since 2003, according to industry data.
• Developers delivered 30 million sq ft of new cold space in 2021-22, overshooting demand by roughly 15%.
• Average asking rents have flattened after rising 40% during 2020-21, CBRE figures show.
• FreezPak Logistics CEO Dave Saoud warns the sector faces “a tough couple of years” ahead.

Once the hottest corner of industrial real estate, refrigerated warehouses are now grappling with empty pallet positions and stalled rent growth.

NEW YORK—The cold-storage industry that lured record capital during the pandemic is now confronting a deep freeze. Vacancy in temperature-controlled warehouses across the United States has climbed to a two-decade high of about 10.5%, according to multiple broker tracking services, as supply additions outrun tepid grocery demand and slowing e-commerce growth.

The oversupply marks a dramatic reversal from 2021, when vacancy briefly fell below 6% and developers rushed to break ground on speculative freezer facilities. Today, pallets sit empty in newly built chambers from Dallas to Atlanta, and industry executives predict a prolonged digestion period.

“The industry is going to have a tough couple of years,” Dave Saoud, co-founder and chief executive of FreezPak Logistics, told analysts last week. The New Jersey-based operator, which expanded its national footprint by 45% since 2020, has now paused new groundbreakings until lease-up rates improve.

From Scarcity to Surplus: How 30 Million Sq Ft Changed the Game

Between 2020 and 2022, refrigerated warehouse stock expanded at the fastest clip on record. Roughly 30 million sq ft of new temperature-controlled space came online, equal to the prior six years of additions combined, according to CBRE research. The building frenzy was triggered by a 14% jump in grocery e-commerce sales in 2020, prompting retailers and third-party logistics firms to reserve freezer capacity far in advance.

Speculative development raced ahead of signed leases

Developers embraced speculative construction—erecting facilities without pre-leases—betting that pandemic-era consumption habits would persist. By mid-2022, 38% of the cold-storage pipeline lacked tenant commitments, compared with 18% in 2019, JLL data show. Today, many of those buildings remain partially vacant, dragging market-wide occupancy down to 89.5%.

The mismatch is starkest in secondary distribution hubs. Inland Empire, Dallas-Fort Worth and Atlanta each added more than 3 million sq ft of cold space since 2021; collectively their vacancy now exceeds 12%, nearly triple the 2019 level. “We overbuilt in land-rich, power-cheap markets,” said Barbara Chatham, senior director of industrial research at JLL. “Lease-up is taking 18 to 24 months instead of the historic nine.”

Construction starts have responded quickly. Cold-storage groundbreakings fell 60% year-over-year in the first quarter, Dodge Construction data show, and lender appetite has cooled after several lenders took losses on stalled projects. Chatham expects completions to drop below 5 million sq ft in 2024, the lowest since 2016, allowing demand to gradually absorb existing stock.

Yet absorption may prove sluggish. Grocery volumes are growing at a modest 2% annual pace, and meal-kit subscription services—once a key driver—have plateaued. Without a new catalyst, executives predict vacancy will remain above 9% through 2025, pressuring rents and asset values.

Rent Growth Stalls After 40% Pandemic Run-Up

Cold-storage rents surged 40% between 2020 and 2021 as tenants competed for scarce freezer bays. Since late 2022, however, average asking rates have flattened, according to CBRE, and selective landlords are offering three to six months of free rent to attract users. The pause marks the first sustained slowdown since 2012.

Concessions are creeping back into deals

In Dallas, where vacancy tops 13%, some owners are dangling 8% annual escalations instead of the customary 3%, effectively trimming nominal rents. Others are waiving minimum electric-cost clauses that can add $0.35 per sq ft annually. “Tenants have leverage again,” said Matt Walaszek, associate director of industrial research at CBRE. “Concessions that disappeared in 2021 are re-emerging.”

Still, refrigerated warehouses command a premium over dry equivalents. Average cold-storage rents hover around $11.50 per sq ft triple-net nationally, roughly double dry-warehouse rates. High build-out costs—$130 to $160 per sq ft versus $55 for ambient space—keep entry barriers steep, limiting the depth of the downturn.

Institutional owners are responding by tightening capital reserves. Americold Realty Trust, the largest U.S. cold-storage REIT, trimmed its 2024 development spend to $150 million from an earlier $250 million guidance. Lineage Logistics, which operates 400 facilities globally, has redirected capex toward automation retrofits rather than greenfield sites.

Private equity backers are also pressing operators to boost same-store cash flow. Average net-operating-income growth across cold-storage portfolios slowed to 1.8% last year, the weakest since 2016, according to MSCI. With debt costs up 200 basis points since 2021, levered returns have turned negative for some 2022 vintage acquisitions, forcing sponsors to inject additional equity.

Who Gets Hurt? Operators, Investors and Food Producers

The vacancy spike is squeezing every link in the cold chain. Public REIT Americold saw same-store NOI decline 1.2% in the first quarter, its first contraction since 2019. Shares of the Atlanta-based landlord have fallen 28% over twelve months, trailing the broader REIT index by 18 percentage points. Privately held firms face tougher math: many 2022 acquisitions were underwritten at 4% cap rates; today transactions are occurring closer to 5.5%, erasing equity cushions.

Food manufacturers are renegotiating contracts

Producers that signed premium leases during the capacity crunch are now seeking relief. Dairy giant Land O’Lakes asked one Midwest provider for a 10% rate rollback last fall, threatening to shift 2 million sq ft to competing facilities, according to two people familiar with the talks. While not all requests succeed, landlords increasingly prefer re-pricing over vacancy. “A 7% rent cut beats a 100% vacancy,” said Kevin Smith, president of logistics brokerage COLDCO.

Third-party logistics operators feel the tightest margin pressure. FreezPak, for example, expanded its footprint by 45% since 2020 but same-facility revenue per cubic foot fell 6% year-over-year. To protect EBITDA, the company is automating pallet handling in Philadelphia and deploying AI-driven temperature monitoring that cuts electricity 8%. Competitors are following suit: spending on cold-storage automation is projected to rise 12% annually through 2026, Interact Analysis estimates.

Smaller regional players face the greatest risk. Family-owned firms that financed expansions with floating-rate debt now confront both higher interest expense and stagnant cash flow. At least four private cold-storage operators have handed keys back to lenders in the past year, according to Chatham, a trend she expects to accelerate if vacancy remains above 10% into 2025.

Is Relief Coming? Analysts Forecast a Long Thaw

Most forecasters expect the cold-storage glut to persist. CBRE projects vacancy will average 9.8% in 2025, still well above the 7% historical norm. A return to balance requires either a demand catalyst—such as reshoring of frozen-food production—or further supply discipline. Neither appears imminent.

Construction lenders are tightening underwriting

Banks that financed 75% of cold-storage projects in 2021 now cap leverage at 60% and require 15% of space pre-leased, according to debt broker StackSource. Mezzanine rates have jumped to SOFR plus 700 bps, making speculative builds prohibitively expensive. The pullback could trim 2025 deliveries to 3 million sq ft, the lowest since 2015, easing oversupply.

Demand drivers remain tepid. Grocery e-commerce is growing 4% annually, down from 15% in 2020. Meal-kit sales have fallen 5% year-over-year, Nielsen data show. Export demand for U.S. pork and poultry offers a partial offset, but port cold-storage capacity is limited. Analysts pencil in 2% average annual absorption through 2026, half the 2015-19 pace.

Eventual consolidation could accelerate rebalancing. Lineage and Americold together control 70% of the national cold-storage network; both firms have expressed interest in acquiring smaller, distressed operators. A wave of distressed asset sales, while painful for sellers, could remove obsolete capacity faster than organic lease-up, Chatham notes. Still, industry veterans caution that a return to sub-8% vacancy may not occur until 2027.

What Does the Deep Freeze Mean for Industrial Real-Estate Investors?

The cold-storage downturn is rippling across the $1.2 trillion U.S. industrial property market. While dry-warehouse vacancy has also risen, refrigerated assets face steeper obsolescence risk: specialized build-outs cost $130-$160 per sq ft and can take five years to repurpose to ambient use. Investors are therefore demanding wider risk premiums.

Cold-storage cap rates have decompressed 150 bps since 2021

Deals that traded at 4% cap rates in 2021 now transact closer to 5.5%, according to JLL, the sharpest repricing across industrial sub-sectors. Public market signals are equally stark. Shares of Americold trade at an implied 6.2% cap rate, a 20% discount to net-asset-value estimates, indicating shareholder skepticism over near-term cash-flow growth.

Private equity funds raised $14 billion for temperature-controlled logistics since 2020; most remain undeployed. Managers are now pivoting toward value-add strategies—buying half-empty facilities at 30% discounts, then investing in automation to lift margins. One such vehicle, sponsored by Blackstone, last month acquired a 2.4 million-sq-ft portfolio in Pennsylvania for $180 per sq ft, 25% below replacement cost.

Debt investors are also circling. Special servicers currently hold $1.1 billion of delinquent cold-storage construction loans, a figure expected to double by year-end. Distressed buyers are bidding 80-85 cents on the dollar, pricing in further NOI erosion. The eventual workout timeline, however, could stretch two to three years given complex collateral structures.

For diversified REITs, the lesson is to treat cold-storage as a cyclical specialty, not a defensive cash cow. Investors that boosted allocations above 10% of industrial NAV during the boom are now underperforming core benchmarks. Going forward, analysts recommend capping exposure at 5% until supply-demand metrics normalize.