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Cold Storage Feels The Chill Of Inflation, Power Costs

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Cold storage is one of a few benefactors of the dramatic shift in consumer tendencies that resulted from the pandemic, but as the ebbing effects of the virus ripple and collide with other forces, this subsector of the red-hot industrial real estate market faces growing pains.

Like many sectors, rising inflation and interest rates, labor challenges and general economic uncertainty pose a challenge for owners and operators in this specialized real estate type, but a steady stream of demand keeps the industry at least partially insulated with cash flows tied to a universal activity: eating.

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Cold Storage’s Explosive Growth Hasn’t Removed Its Risk

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The growth in the cold storage sector of industrial real estate over the past 12 months has been simply staggering.

Average rent for U.S. cold storage space increased about 15% from the first quarter through the end of last year, CoStar Group reports. Since 2017, rent in the sector has grown by 29%, easily outpacing the still-impressive 21% growth in industrial properties overall over that time period.

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